Marketing research

Marketing research

Marketing researchCopyright © 2011 cesim@cesim.com

Marketing research

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Table of Contents1. About Cesim ................................................................................................................. 1

1.1. General ............................................................................................................. 11.2. Cesim products ................................................................................................... 11.3. Contact Cesim .................................................................................................... 1

2. Marketing research ...................................................................................................... 22.1. Long term advertising effect ............................................................................... 22.2. Increased costs related to error in sales estimate ...................................................... 32.3. Product attributes affecting purchase decision ......................................................... 3

2.3.1. Compactness .......................................................................................... 32.3.2. Battery life ............................................................................................ 42.3.3. Design .................................................................................................. 42.3.4. Extended warranty length ......................................................................... 62.3.5. Price .................................................................................................... 6

2.4. Advertising effectiveness research ........................................................................ 72.5. Distribution channel investment effectiveness research .............................................. 82.6. Smartphone feature preferences survey .................................................................. 9

2.6.1. European market, Households ................................................................... 92.6.2. European market, High-End Households ..................................................... 92.6.3. European market, Companies .................................................................. 102.6.4. European market, High-End Companies ..................................................... 102.6.5. Asian market, Households ...................................................................... 102.6.6. Asian market, High-End Households ......................................................... 102.6.7. Asian market, Companies ....................................................................... 112.6.8. Asian market, High-End Companies ......................................................... 11

About Cesim

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Chapter 1. About Cesim1.1. General

Cesim provides corporations, universities, and other educational institutions easy-to-use and cost-effectivebusiness simulations that can be integrated in various business courses. Headquartered in Finland since1996, we operate globally through our own offices and partner network.

1.2. Cesim productsCesim offers four types of simulations to educational institutions:

• Cesim Global Challenge®

An on-line simulation designed for strategy and international business studies. It develops students'understanding of the complexity of global business operations in a dynamic, competitive environment.

• SimBrand

An on-line marketing management simulation that develops students' understanding of the marketingdecision-making process as a whole, with particular emphasis on profitability.

• OnService

An on-line services management simulation that helps students to practice and learn service businesssuccess factors in a Small to Medium sized Enterprise (SME) environment.

• Hospitality

An on-line hospitality simulation that helps students to practice and learn about small scale hotel andrestaurant operations.

• SimFirm

An entry level on-line simulation designed to develop understanding on how decisions in different func-tions of a company attribute to overall success in a competitive, international business environment.

Simulations can be conducted in a few days or over an entire semester. The number of simulation rounds,schedules, and team structures can be adjusted even after the course has started.

1.3. Contact CesimCesim OyArkadiankatu 21 A00100 HelsinkiFinlandtel. +358 9 406 660http://www.cesim.com/finland@cesim.com

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Marketing research

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Chapter 2. Marketing research2.1. Long term advertising effect

Research has indicated that advertising has an effect not only in the current period but on the demand oflater periods also. There can be a lead time to a sale to happen. Another cause for the carryover effect isthat a customer that has made a purchase based on advertising will more likely repurchase the same brandwhen the re-buy situation actualizes.

The research indicates that the carryover effect of the last year’s advertising budget (=100%) can be quan-tified to equal 45% of that budget. Of the 45% another 45% (0,45 x 0,45 = 0,2025 = 20,25% ) will be leftfor the third period and so on.

The following graph show an example of how carryover works. The blue bar shows the advertising budgetfor the period and the red bar shows the total cumulative effect of advertising investment in the previousperiods.

1. One 500 000€ investment in the first period, a constant decay of the accumulated effort in time.

2. Consistent 500 000€ investments: a growing cumulative effect.

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2.2. Increased costs related to error in salesestimate

Manufacturing reports that the unit costs of production will increase when sales estimates differ from actualsales. The production company needs to plan production schedule volumes in advance using sales estimatesprovided by you. If the total volume of global sales differs from the global aggregate sales estimate fora given product, adjustments will need to be made to the production schedule. The adjustments to theproduction schedule will cause additional costs.

As a rule of thumb, a 50% error in the sales estimate will result in a 2% increase in the variable unit cost.

2.3. Product attributes affecting purchase de-cision

Marketing research has produced results on product attributes affecting purchase decision. These attributesinclude price, compactness, battery life, design, number of features and the length of the warranty of aproduct.

Included are part-worth analyses of the utilities for the different levels of each of the attributes. A higherpositive utility depicts more value to the customer and hence can be related to higher demand.

Part-worth utility functions of attributes:

2.3.1. CompactnessEuropean Market

Asian market

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Compactness index is presented on the x-axis and the relative demand effect on the y-axis. Hence we cansee the effects on demand for the different segments when compactness is increased. We can observe aslightly steeper slope for all of the Asian segments.

2.3.2. Battery life

In this chart we have the battery life index on the x-axis and relative demand effect on the y-axis. Europeanand Asian customers have very similar views concerning the importance of battery life. Because of thegreat similarities, the marketing agency has provided a graph that represents both markets equally.

2.3.3. DesignEuropean market

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Asian market

Here on the x-axis we have all of the segments. The bars represent how well a certain design suits thatsegment. On the y-axis we have the relative preferences of the designs. For example European householdsseem to prefer the sport design.

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2.3.4. Extended warranty length

Different customer segments have different views on the importance of warranty length. Research indicatesthat having a warranty period longer than that of the market average can increase demand. In this graph wehave the effect on demand on the y-axis and warranty period length on x-axis. Market average warrantyperiod here was 12 months.

2.3.5. PriceEuropean market

Asian market

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This graph displays the demand index on the y-axis and price level on the x-axis. The demand index onlyreflects the elasticity of different segments and it does not depict real demand exactly.

2.4. Advertising effectiveness researchThe ad agency your company is using has provided you with results of their advertising effectiveness.With it they are trying to convince you of the positive effects increasing advertising budget will have onproduct demand.

Advertising increases consumer awareness of your products. The more consumers that are aware of yourproduct, the more likely they are to purchase it. The AIDA-model (Attention, Interest, Desire, Action) ofconsumer behavior sheds some light on how attention can lead to action (‘action’ meaning purchase inthis case).

Example of AIDA model with a generic product:

• Attention – 100 consumers

• Interest – 20 consumers

• Desire – 10 consumers

• Action – 5 consumers (sales)

So, increasing the number of consumers that are aware of your product will most likely increase the numberof sales. But remember it’s not only advertising that makes the sale, the product must be desirable enoughfor the target consumer to actually buy it.

There are differences in how effectively the agency can reach the different customer segments:

When comparing two different advertising budgets, a 10% difference in the budget is estimated toresult in…

… a 1,2-1,4% difference in the number of customers reached and estimated demand when targeting House-holds.

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… a 1,4-1,6% difference in the number of customers reached and estimated demand when targeting High-end Households.

… a 0,5-0,7% difference in the number of customers reached and estimated demand when targeting Com-panies.

… a 0,8-0,9% difference in the number of customers reached and estimated demand when targeting High-end Companies.

This chart summarizes the research results. In this research the advertisement investment was 10% abovethe market average.

2.5. Distribution channel investment effective-ness research

A strong investment in the target customer’s preferred distribution channel(s) will have a positive effect onsales. This includes the number of outlets stocking the product, the way in which the product is presentedin the outlets and the promotional efforts aimed at motivating the salespeople at the outlets.

Marketing intelligence has reported on the effectiveness of distribution channel investments. Some distri-bution channel investments seem to yield more effect than others. The research conducted aimed at quan-tifying the effects of distribution channel investments into one combined channel presence and promotionindex. The combined index includes the availability of the product in the channel, the way the product ispresented and the motivation of the salespeople working in the channel. The base level of the index wascalibrated at 100 points for the study.

When distribution channel investment in Specialty stores was increased by 10%, it resulted in a 1,1 pointincrease in the combined index when done in European markets and a 1,2 increase in the combined indexwhen done in Asian markets.

When distribution channel investment in Household appliance stores was increased by 10%, it resulted ina 0,9 point increase in the combined index in European markets and a 1,0 point increase in the combinedindex when done in Asian markets.

When distribution channel investment in Department stores was increased by 10%, it resulted in a 0,7point increase in the combined index in European markets and a 1,0 point increase in the combined indexwhen done in Asian markets.

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a 10% increase in distribution channel investment increases combined channel presence and promotionindex by channel

2.6. Smartphone feature preferences surveyMarketing research using a questionnaire survey has produced results on the relative desirability of dif-ferent features on a smartphone. The features included in the study were Photo/Video, Extra memory,Premium display, Navigation and Security. Consumers on both European and Asian segments were askedto rate the importance of the different features on Likert scale from ‘Not important’ to ‘Very important’.The following graphs illustrate the importance of each of the features for different segments. Please notethat 2 on axis below is different from 2 on axis in graphs for compactness and battery life in chapter 2.3.1

2.6.1. European market, Households

2.6.2. European market, High-End Households

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2.6.3. European market, Companies

2.6.4. European market, High-End Companies

2.6.5. Asian market, Households

2.6.6. Asian market, High-End Households

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2.6.7. Asian market, Companies

2.6.8. Asian market, High-End Companies