Marketing Research:Applications

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Assessing Market Potential: Sales Forecasting

• Defining market demand– Demand can be measured at several levels

Product-item Sales

Product-form Sales

Product-line Sales

Com pany Sales

Industry Sales

National Sales

Product Levels

Indiv idual Custom er Sale

Sales by territory

Sales by Country

G lobal Sales

Space Levels

Short-range Sales

M edium -range Sales

Long-range Sales

T im e Levels

Levels of M arket Dem and

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Describing a market

• Penetrated Market– Current number of users of a product or a

service and the sales volume generated by them.

• Potential market– Those people who have an interest in buying

the product or the service• Available Market

– Those people in the potential market having an ability to use the product/service.

• Served or Target Market– The market that the firm can effectively

compete in

• Source of Information:

• Secondary data

• Sample Survey

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Predicting Future Demand

• In choosing the appropriate forecasting method, the analyst must consider the following:– The data that can be used: The accuracy, currency,

representativeness, representativeness and extensiveness of data must be assessed before choosing a technique.

– The Technique: The analyst must have adequate knowledge about the technique and its limitations; he/she must be comfortable with it.

– Cost: Greater accuracy involves greater cost. Cost Vs. level of accuracy demanded must be assessed before choosing the technique

– Time horizon: The method or technique must be the most appropriate for the period of time in question.

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Approaches to Sales Forecasting

• Basic approaches to sales forecasting include:Stage 1. Environmental forecast about consumer

spending, consumer saving, interest rate. Inflation, employment, investment etc.;

Stage 2. Use the above data along with industry and environmental trends to forecast sales and profits to be earned by the industry. Often, this is not possible. I those cases, this stage is skipped.

Stage 3. Develop a company sales forecast using the data in 2 above and assuming a given market share.

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Forecasting Sales of established products/services

• Two approaches with variants– Questioning people to generate primary data

• Surveys of buyer intentions• Sales-force opinion• Expert opinion

– Analyzing historical data with Secondary data• Time dependent approaches

– time-series analysis,moving average,exponential smoothing, statistical demand analysis etc.

• Mathematical and statistical models– linear programming, transportation algorithm, assignment

models, PERT/CPM Network models, Decision Tree analysis, Inventory models, Markov Process, Queuing, Simulation etc.

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Segmentation Research I

• “Segment” – refers to a unique group of customers or potential customers

who share some common characteristics that differentiate them from others.

– Segmenting and choosing the optimum market is called target marketing and is a vital marketing skill.

• Segmentation of the consumer market may be based on:– demographic variables– geographic variables– geodemographic variables– psychographic variables– behavior patterns

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Segmentation Research II

• Geographic segments:– Based on consumers geographic location including streets,

towns, cities, provinces, countries, regions, continents, trading and/or political blocks, such as AFTA, NAFTA, ASEAN etc.

• Demographic segments:– based on variables such as age, sex, level of education,

marital status, family lifecycle, job type and level of income etc.

• Geodemographic segments:– based on variables such as house-type and locations, for

example, people who live in high-rise apartment complex

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Segmentation Research III

• Psychographic segments– developed on the basis of the psychological profile of

people and includes variables such as attitude, lifestyle and personalities of people.

• Behavioral segments– based on behavior pattern of people such as consumption

behavior such as heavy user, medium user, light user etc. and on the basis of other benefit enjoyed.

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Segmentation in Industrial, organizational and Business-to Business Market.

• Different variables that may be used in these markets include:– Customer type

• Type of product or service, standard industrial classification code may be used

– Customer location– Size

• In terms of sales, number of staff etc.

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Product Research

• Has three roles:– Idea Generation

• Includes alternative specifications for product concepts utilizing end user analysis or problem analysis.

– Screening: Evaluating new-product ideas• Refers to initial screening of consumer reactions to new

product concepts. Not effective for products that are radically innovative and for products that require significant changes in the consumption pattern.

– Consumer product/market testing• involves testing the product in the market

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STAGE I: Idea Generation

• Focus groups and direct observation provide insights for product development.

• Secondary data, Group discussion, Brainstorming [ on a given problem]

• Problem Inventory Analysis -->Examining Customer complaints• Attribute based customer surveys

– Involves listing all the product attributes and then systematically modify one or more of them to see what would improve the product.

• Morphological Analysis– Involves identification of the relevant dimensions of the

product under study and enumeration of relevant variables with each dimension identified.

• Imitation, Acquisition, licensing

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STAGE II: Screening

Purposes of concept testing:• Determine customer attitude towards

the product concept or idea.• Measure customers’ reaction towards

the product’s attributes, e.g.. packaging, color, size, etc..

• Predict the trial rate of the intended product

• Determine whether the product concept warrants further development and provide guidance on how the concept might be improved or re-defined.

Data collection methods include:

• Focus group discussion• Survey Research

– Not very easy– Questions are to be

formulated carefully to capture and effectively communicate the spark of an idea.

• Demonstration

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Typical Questions in Concept Testing

QUESTION ITEMS TYPICAL QUESTIONSUniqueness of theconcept

In your opinion, how different is this product compared toother existing products in the market?

Product attribute What do you particularly like about the shape of thisproduct?

User Would you be more likely to buy this product for yourselfor as a gift for someone else?

Price/ValueReaction

Which of the statements shown in this card best describeshow you feel about the product? (Show cards withcomments expressing reactions).

Place of Purchase Where would you shop for the product?Frequency ofpurchase

How often would you buy this product?

Overall impressionFrom what you have learnt about the product, whichword/phrases [show some words/phrases]best describesyour reaction to this product

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STAGE III: Product/Market Testing I

• Product and market testing provides a more detailed assessment of a new product's chances for success.

• Includes technical testing, preference and satisfaction testing, simulated test markets and test markets to evaluate potential success/failure and define important marketing elements.– Uncovers product shortcomings– evaluate commercial products– evaluate alternative formulations– uncover the appeal of the product to various market segments– gain ideas for other elements of the marketing program

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Product/Market Testing II

• Technical Testing on a prototype provides information on product shelf life, product wear/tear rates, problems regarding use/consumption, potential defects, maintenance schedule

• Preference and satisfaction testing– reserved for the final version of the product

• Simulated test marketing [laboratory test markets] provides insights to potential market response/market share– Popular models include ASSESSOR, BASES, DESIGNOR,

and LITMUS

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Approaches to measure performance of the test product

• Three Approaches:– Testing against a standard product

• Test Product --> brand leader– Horse Racing Alternative

• Several test products are developed for testing against one another to determine which one attains the highest level of consumer acceptance.

– Testing against a historical standard• Test product --> Performance of a successful product

which may not be involved in the test. A seldom used technique.

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Product/Market Testing III: Test Marketing

• Objective: – To obtain reasonable prediction for performance of a new

product;– To understand the contributing factors underlying a

particular performance;– To provide management with the opportunity to pre-test

alternative marketing strategies.• Only those products, which have shown a good chance

of success in the earlier concept and product development test, are subjected to test marketing.

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Typical information gathered and major design issues in test marketing

• Awareness level; • Purchase and repurchase

rate;• Users’ experience with the

product;• Users’ perception of the

product;• Users’ profile and lifestyles;• Reasons for not using

products;• Market share.

Design Issues:• The number of test markets

to be chosen;– at least three – involves cost-benefit

analysis• The criteria used for

selecting test markets;– a normal and not over-

tested market• The length of the test.

– six to 12 months

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Price Research I

• Generally undertaken for exploring pricing approaches for new products or services before they are launched. Involves

• showing different sets of brands in the same product category to respondents at different prices and asking them which one they would buy;

• presenting different prices for a product/service to respondents and asking them if they would buy the product/service. The responses are then used to construct a so-called “buy-response’ curve.

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Price Research II

• Pricing research may also be conducted using consumer panels. Data obtained may be analyzed using regression analysis. Regression analysis can help in sorting out effects of price Vs other variables on quantities sold.

• Sample survey may also be used in price research. However, this should be used with care since obtaining a response curve using survey may be subject to error and bias.

• Other pricing research techniques include:– Laboratory experiments, – simulated test markets– using standard test market

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Promotion Research

• Objective: To develop advertising appeals. • Types of research generally undertaken include:

– Psychological or motivational studies• Generally used within the framework of individual interviews.

Involves talking with people in depth about what a product or service may mean to them, what feelings are evoked by it, and discover what it symbolizes to them.

– Sociological studies• Focus group studies may be undertaken to generate ideas.

– Anthropological studies• A small number of people may be observed to understand how a

product fits into their lives and what keep them interested in a particular brand.

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V erbal Response

Physiological Response

Behavioral Response

Pre-test

Recognition

Recall

T riple A ssociation

Post-test

M ESSAGE RESEARCH

Circulation Research

Readership Research

New spaper as a M edium

Telephone Interview

A udim eter Device

People M eter

D iary M ethod

Television as a M edium

Radio, Cinem a, Internet

M EDIA RESEARCH

A D VE RT IS ING RE SE A RC H

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Message Research: Pre-test

• Pre-test refers to the test of an ad-message before releasing the advertisement. Test techniques commonly used are:– Verbal responses involving

• Consumer jury method• Portfolio test• Qualitative research• On-the air-test and Theater persuasion test

– Physiological responses involving• Galvanic skin responses• Pupil dilation responses and• Eye movement tracking

– Behavioral responses involving• In-store persuasion

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Pre-test II

• Consumer jury method: Uses 50 to 100 customers as jurors who are asked to rank the test advertisements in order of interest, preference or ability to influence the purchase of the product.

• Portfolio test:A sample of consumers are asked to look through a portfolio of 6 - 8 print advertisements within an allotted period of time. The portfolio is then taken away and the respondents are asked to recall the specifics of the ads shown. Recalls are generally unaided. The effectiveness of the test is measured by attributes such as ability to recall the contents, claim of credibility in the advertisement, general reaction, etc.

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Pre-test II

• Qualitative Research: The two most widely used methods are Focus group discussions and depth interviews. Commonly used during the development stage of the advertisement.

• On-the-air test:The test advertisement is broadcast in a small number of test markets and selected respondents are interviewed by telephone on the following day to ascertain various aspects of the ad message.

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Pre-test III

• Theater persuasion test: Involves a test group of target customers who are invited to a small theater to view pilot episodes of some new TV programs. But before the show starts, they are presented with a list of product brands (including the brand shown on the test ad) and asked to indicate their preferred brand. It is announced that a lucky draw will be held and each winner will be awarded their preferred brand. The TV program is then shown including the test ad. At the end of the show, the viewers are once again asked to indicate their preferred brand followed by a second lucky draw.

• Brand preferences both before and after the show are then computed and compared.

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Pre-test - IV

• Galvanic Skin Responses, pupil dilation response and eye-movement tracking method make use of different types of mechanical devices are not very popular methods.

• In-store persuasion: Involves intercepting a quota sample of shoppers [Sample X] in a retail store who are shown a stack of print advertisements including the test ad and are given a coupon booklet with discounts for several products including the product in the test ad. These shoppers are given sufficient time to look through these ads. Intercept Sample X shoppers as they leave the shop and record if they have purchased the product carried in the test ad. Calculate the purchase incidence.

• Repeat the same treatment to another Quota sample of shoppers [Sample Y] who are not shown the stack of ads. Calculate the purchase incidence and determine if they are significantly different from that of Sample X.

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Post-test

• Most of the pre-testing techniques are applicable to post testing. Additional ones are briefly described below:

• Recognition Test: Measures the incidence and intensity of reading an advertisement. Normally involves interview with 100 to 150 qualified readers of a given issue of a magazine or periodical that carried the advertisement. Specific questions are then asked to see if they can remember the ad, its contents and the extent to which they remembered.

• Recall: Respondents are not shown an advertisement in full in advance but asked what he/she can remember about the ad.

• Triple Association Test: Used for assessing respondents’ abilities to associate the product category, the brand, and the copy theme. Two of these three are read or shown to a respondent who is asked to mention the third.

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Media Research I

Focuses on six aspects:1. Media distribution

Refers to circulation of newspaper/magazine/periodicals or the number of TV/Radio ownership and Internet subscription.

2. Media audienceNumber of people exposed to the ad medium in question.

3. ExposureNumber of people actually noting the advertisement; generally less than media audience.

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Media Research II

Focuses on six aspects...4. Perception

Number of people having conscious awareness and perception of the advertisement in question. In print advertisements, perception is affected by factors such as size, color, position and language of the media. Typically, perception is less than exposure.

5. CommunicationNumber of people who comprehend specific things about and aspects of the advertisement. Communication lags perception.

6. PurchaseNumber of people purchasing the product after seeing the advertisement.

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Newspaper as Ad Medium

• Major types of information needed are;– Circulation

• Generally available from secondary sources in the form of audited circulation figures.

– Readership• Data on readership is generally unknown and

need to be gathered through sample surveys. – Often problematic because identifying the reader is not

always easy.

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Television as a Medium I

Objective is to determine the TV audience. Programs watched by more people are preferred by advertisers. Methods of measurement include:

• Determining the Program ratingRespondents are provided with a roster of TV programs shown during the past three days and are asked a series of questions to ascertain the programs (i) they generally watch, and (ii) the programs they have actually watched on each of the three days in question.

• Telephone interviewingAlso known as coincidental telephone interview, this method involves telephone interview with a sample of respondents during the broadcasting hour.

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Television as a Medium II

– Using audimeter device• Developed by A.C. Nielson Company, this is the most sophisticated

method of TV audience measurement. A technical device called ‘audimeter’ is attached to each of the TV sets of a panel of pre-selected households. The device automatically records the time when the TV set is switched on (and off), the channel watched, duration of watching; and instantly transmits the data to a central computer for processing. However, an audimeter does not record who in the household is/are watching.

– Using people meter– A technical device that like audimeter, which is activated (and

deactivated) by each household member pressing a button when he or she watches the program (stops watching it).

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Television as a Medium III

• Diary MethodA specially designed diary is given to a panel of households to record the television viewing behavior of the viewer

• Number of radio listeners may be measured in the same way as TV audience is measured. Simplest way to measure cinema audience is through sample survey. Internet users may also be identified using Internet-based surveys.

Radio/Cinema/Internet as media