abhishreshthaa
Abhijeet S
APPLICATION OF MARKETING RESEARCH
TRADITIONAL APPLICATION OF MARKETING RESEARCH
Traditionally, marketing decisions have been divided into 4P’s – product, price, promotion and place decisions.
I. New-product research
1. Concept generation
There are two types of concept generation research. They are:
a. Need identification.
b. Concept identification.
2. Product Evaluation and development
a. Use testing.
The simplest form of use testing gives users the product and after a reasonable amount of time asks their reactions their intentions to buy it.
b. Predicting trial.
Trial levels (the percentage of a sample of consumers who had purchased the product at least once within 12 months after launch) were predicted on the basis of three variables:
• Product class penetration (PCP)
• Promotional expenditure
• Distribution of the product
c. Pretest marketing.
Two approaches are used to predict the new brand’s market share.
• The first one is based on preference judgments. The preference data are used to predict the proportion of purchases of the new brand that respondents will make given that the new brand is in their response set.
• The second approach involves estimating trial and repeat purchase levels based on the respondent’s purchase decisions and intentions-to-buy judgments.
3. Test marketing
Test marketing allows the researcher to test the impact of the total marketing program, with all its interdependencies, in a market context as opposed to the artificial, context associated with the concept and product tests that have been discussed.
Test marketing has two primary functions.
There are really two types of test markets:
Really new product
Really new product normally take a long time (sometimes 15 to 20 years) from conception to national introduction. Really new products (RNPs) are those that:
II. PRICING RESEARCH
Research may be used to evaluate alternatives price approaches for new products before launch or for proposed changes in products already on the market.
There are two general approaches to pricing research.
1. The first is the well-established Gabor and Grainger method. In this method, different prices for a product are presented to respondents (often by using test-priced, with the corresponding number of affirmative purchase intentions is produced.
2. In a second approach, respondents are shown different sets of brands in the same product category, at different prices and are asked which they would buy. This multibrand-choice method allows respondents to take into account competitions’ brands as they normally would outside such a test. S such, this technique represents a form of simulation of the point of sale.
Decisions regarding price ranges for new product have to be made early in the development stage. A product concept cannot be tested fully, for example, without indicating its price, so when the product is ready to be introduced, a decision must be made about its specific price. Decisions on price changes-should we change the price, and, if so, in which way and by how much? – will then need to be made over the product’s life cycle.
Either of two pricing strategies can be followed.
1. Skimming strategy.
2. Share-penetration strategy
III. Distribution research
a. Warehouse and Retail Location Research
The essential questions to be answered before a location decision is made are: “What costs and delivery times would result if we choose one location over another?”
Simulation of scenarios is used to answer these questions. The simulation can be relatively simple, paper-and-pencil exercise for the location of a single warehouse in a limited geographic area, or it can be a complex, computerized simulation of a warehousing system for a regional or national market.
i. Center of gravity simulation. The center for gravity method of simulation is used to locate a single warehouse or retail site. In this method, the approximate location that will minimize the distance to customers, weighted by the quantities purchased, is determined. The more symmetry there is in customer locations and weights, the more nearly the initial calculation approximates the optimal location. The location indicated by the first calculation can be checked to be determine if it is optimal (or near optimal) by using a “confirming” procedure. If it in not optimal, successive calculations can be made as necessary to “home in” on the best location.
ii. Computerized simulation models. The concept involved in simulations for this purpose is quite simple. Data that describes the customer characteristics (location of plants, potential warehouse and retail sites) and distribution costs (costs per mile by volume shipped, fixed and variable costs of operating each warehouse, the effect of shipping delays on and variable costs of operating each warehouse, the effect of shipping delays on customer demand) are generated and input into the computer. The computer is programmed to simulate various combinations of numbers and locations of warehouses, and to indicate which one(s) gives the lowest total operating cost. Effective results have been achieved by using computer simulations to design distribution systems.
iii. Trade area analysis. Formal models have been developed that can be used to predict the trading area of a given shopping center or retail outlet based on relative size, travel time, and image. A variety of other techniques can be used to establish trading areas. An analysis of the addresses of the credit card customers or license plates of the cars (by plotting the addresses of the car owners) can provide a useful estimate of the trading area. Check-clearance data can be used to supplement this information. The best, but also the most expensive way of establishing trading area bound Aries is to conduct surveys to determine them.
iv. Outlet location research. Individual companies and, more commonly, chains, financial institutions with multiple outlets, and franchise operations must decide on the physical location of their outlet(s). Three general methods involves plotting the area surrounding the potential site in terms of residential neighborhood, income levels, and competitive stores. Regression models have been used for location studies for a variety of retail outlets, including banks, grocery stores, liquor stores, chain stores and hotels. Data for building the model and for evaluating new potential locations are obtained through secondary data analysis and surveys.
b. Number and location of Sales Representatives
How many sales representatives should be in a given territory? There are three general research methods for answering this question.
• The first, the sales effort approach, is applicable when the product line is first introduced and there is no operating history to provide sales data.
• The second involves the statistical analysis of sales data and can be used after the sales program is under way.
• The third involves a field experiment and is also applicable only after the sales program has begun.
IV. Promotion research
It focuses on the decision that are commonly made when designing a promotion strategy.
The decision for the promotion part of a marketing strategy can be divided in to
(1) Advertising and
(2) Sales promotion.
Sales promotion affects the company in the short term, whereas advertising decisions have long-term effects. Companies spend more time and resources on advertising research than on sales promotion research because of the greater risk and uncertainty in advertising research.
1. Advertising research
Most companies concentrate on advertising because advertising decisions are more costly and risky than sales promotion decisions. Advertiseing reasearch typically, involves generating information for making decisions in the awareness, recognition, preference and purchasing stages.
What separates an effective advertisement from a dud? The criteria will depend, on th brand involved and its advertising objective. However, four basic categories of responses are used in advertising research in general and copy testing in particular:
a) Advertisement recognition
b) Recall of the commercial and its contents
c) The measure of commercial persuasion and the impact on purchase behavior.
• Purchase behavior
- Coupon stimulating purchasing
- Split-cables tests. Information Resources Inc’s (IRI) BehaviorScan is one of several spilt-cable testing operations.
BehaviorScan monitors the purchases of panel members as well as in-store information such s special prices, features and displays.
• Tracking studies
When a campaign is running, its impact often is monitored via a tracking study Periodic sampling of the target audience provide a time trend of measures of interest.
The purpose is to evaluate and reassess the advertising campaign, and perhaps also to understand why it is or is not working. Among the measures that often are traced are advertisement awareness, awareness of elements of the advertisement, brand awareness, beliefs about brand attributes, brand image, occasions of use, and brand preference. Of particular interest is knowing how the campaign is affecting the brand, as opposed to how the advertisement is communicating the message.
• Diagnostics testing
A whole category of advertising research methods is designed primarily not to test the impact of a total ad but rather to help creative people understand how the parts of the ad contribute to its impact.
Which are weak and how do they interact? Most of these approaches can be applied to mock-ups of proposed ads as well as finished ads.
• Copy test validity
This test refers to the ability to predict advertising response.
• Budget decision
Arriving at analytical, research-based judgments as to the optimal advertising budget is surprisingly difficult. However, there are research inputs that can be helpful.
Tracking studies that show advertising is either surpassing or failing to reach communication objectives can suggest that the budget should be either reduced or increased.
• Media research
In evaluating a particular media alternative, it is necessary to know how many advertising exposures it will deliver and what will be the characteristics of the audience.
A first cut of the vehicle’s value is the cost per thousand (circulation), the advertisement insertion cost divided by the size of the audience.
2. Sales Promotion Research
There are three major types of sales promotion: consumer promotion, retailer promotion and trade promotions.
In general, the consumer promotion, manufactures offer of all sales promotion activities. In consumer promotion, manufacturers offer promotions promotions directly to consumers, whereas retail promotions involve promotions by retailers to consumers. Trade promotions involve manufacturers offering promotions to retailers or other trade entities. Trade entities can also promote to each other.
For example ,a distributor can offer a steep temporary price cut to retailers in order to sell excess inventory. We call trade promotions, since the recipient of the promotion is a marketing intermediary.
Sometimes several manufacturers or several retailers combine in one promotion. These are called cooperative promotions or promotion partnerships.
TRADITIONAL APPLICATION OF MARKETING RESEARCH
Traditionally, marketing decisions have been divided into 4P’s – product, price, promotion and place decisions.
I. New-product research
- New product development is critical to the life of most organizations as they adapt to their changing environment.
- Since, by definition, new products contain unfamiliar aspects for the organization, there will be uncertainty associated with new products. New product can be divided into four stages
1. Concept generation
There are two types of concept generation research. They are:
a. Need identification.
- The emphasis in need research is on identifying unfilled needs in the market. Marketing research can identify needs in various ways. Some are qualitative and others, such as segmentation studies can be quantitative. Following are some examples:
- i. Perceptual maps, in which products are positioned along the dimensions by which users perceive and evaluate, can suggest gaps into which new products might fit. Multidimensional scaling is used to generate these perception gaps.
- ii. Social and environment trends can be analyzed.
- iii. An approach termed benefit structure analysis has product users identify the benefits desired and the extent to which the product delivers those benefits, for specification applications. The result is an identification of benefits sought that current product do not deliver.
- iv. Lead user analysis is the approach in which instead of just asking users what they have done, their solutions are collected more formally. Lead users are positioned to benefit significantly by solving problems associated with these needs. Once a lead user is identified, the concepts that company or person generates are tested.
b. Concept identification.
- During the new product development process there is usually a point where a concept is formed but there is no tangible usable product that can be tested.
- The concept should be defined well enough so that it is communicable.
- There may be simply a verbal description, or there may be rough idea for a name, a package, or an advertisement approach.
- The role of marketing research at this stage is to determine if the concept warrants further development and to provide guidance on how it might be improved and refined.
2. Product Evaluation and development
- Product evaluation and development, or product testing, is very similar to concept testing, in terms of both the objectives and the techniques.
- The aim is still to predict market response to determine whether or not the product should be carried forward.
a. Use testing.
The simplest form of use testing gives users the product and after a reasonable amount of time asks their reactions their intentions to buy it.
b. Predicting trial.
Trial levels (the percentage of a sample of consumers who had purchased the product at least once within 12 months after launch) were predicted on the basis of three variables:
• Product class penetration (PCP)
• Promotional expenditure
• Distribution of the product
c. Pretest marketing.
Two approaches are used to predict the new brand’s market share.
• The first one is based on preference judgments. The preference data are used to predict the proportion of purchases of the new brand that respondents will make given that the new brand is in their response set.
• The second approach involves estimating trial and repeat purchase levels based on the respondent’s purchase decisions and intentions-to-buy judgments.
3. Test marketing
Test marketing allows the researcher to test the impact of the total marketing program, with all its interdependencies, in a market context as opposed to the artificial, context associated with the concept and product tests that have been discussed.
Test marketing has two primary functions.
- • The first is to gain information and experience with the marketing program before making a total commitment to it.
- • The second is to predict the program’s outcome when it is applied to the total market.
There are really two types of test markets:
- 1. Sell-in test markets are cities in which the product is sold just as it would be in a national launch. In particular, the product has to gain distribution space.
- 2. Controlled-distribution scanner markets are cities for which distribution is prearranged and the purchase of a panel of customers are monitored using scanner data.
Really new product
Really new product normally take a long time (sometimes 15 to 20 years) from conception to national introduction. Really new products (RNPs) are those that:
- • Create or expand a new category, thereby making cross-category competition the key (e.g., fruit teas versus soft drinks)
- • Are new to customers, for whom substantial learning is often required (i.e., what it can be used for, what it competes with, why it is useful).
- • Raise broad issues such as appropriate channels of distribution and organizational responsibility.
- • Create (sometimes) a need for infrastructure, software and add-ons.
II. PRICING RESEARCH
Research may be used to evaluate alternatives price approaches for new products before launch or for proposed changes in products already on the market.
There are two general approaches to pricing research.
1. The first is the well-established Gabor and Grainger method. In this method, different prices for a product are presented to respondents (often by using test-priced, with the corresponding number of affirmative purchase intentions is produced.
2. In a second approach, respondents are shown different sets of brands in the same product category, at different prices and are asked which they would buy. This multibrand-choice method allows respondents to take into account competitions’ brands as they normally would outside such a test. S such, this technique represents a form of simulation of the point of sale.
Decisions regarding price ranges for new product have to be made early in the development stage. A product concept cannot be tested fully, for example, without indicating its price, so when the product is ready to be introduced, a decision must be made about its specific price. Decisions on price changes-should we change the price, and, if so, in which way and by how much? – will then need to be made over the product’s life cycle.
Either of two pricing strategies can be followed.
1. Skimming strategy.
- The skimming strategy is based on the concept of pricing the product at the point at which profits will be the greatest until market conditions change or supply costs dictate a price change.
- Under this strategy, the optimal price is the one that results in the greatest positive difference between total revenues and total costs.
2. Share-penetration strategy
- Penetration strategy is a strategy based on the concept that average unit production costs continue to go down as cumulative output increases.
- Potential profits in the early stages of the product life cycle are sacrificed in the expectation that higher volumes in later periods will generate sufficiently greater profits to result in overall profit for the product over its life.
III. Distribution research
- Traditionally, the distribution decisions in marketing strategy involve the number and location of salepersons, retail outlets, warehouses and the size of discount to be offered.
- The discount to be offered to the members in the channel of distribution usually is determined by what is being offered by existing or similar products, and also whether the firm wants to follow a “push” or a “pull” strategy.
- Marketing research, however, plays an important role in the number and location in decisions about numbers and locations.
a. Warehouse and Retail Location Research
The essential questions to be answered before a location decision is made are: “What costs and delivery times would result if we choose one location over another?”
Simulation of scenarios is used to answer these questions. The simulation can be relatively simple, paper-and-pencil exercise for the location of a single warehouse in a limited geographic area, or it can be a complex, computerized simulation of a warehousing system for a regional or national market.
i. Center of gravity simulation. The center for gravity method of simulation is used to locate a single warehouse or retail site. In this method, the approximate location that will minimize the distance to customers, weighted by the quantities purchased, is determined. The more symmetry there is in customer locations and weights, the more nearly the initial calculation approximates the optimal location. The location indicated by the first calculation can be checked to be determine if it is optimal (or near optimal) by using a “confirming” procedure. If it in not optimal, successive calculations can be made as necessary to “home in” on the best location.
ii. Computerized simulation models. The concept involved in simulations for this purpose is quite simple. Data that describes the customer characteristics (location of plants, potential warehouse and retail sites) and distribution costs (costs per mile by volume shipped, fixed and variable costs of operating each warehouse, the effect of shipping delays on and variable costs of operating each warehouse, the effect of shipping delays on customer demand) are generated and input into the computer. The computer is programmed to simulate various combinations of numbers and locations of warehouses, and to indicate which one(s) gives the lowest total operating cost. Effective results have been achieved by using computer simulations to design distribution systems.
iii. Trade area analysis. Formal models have been developed that can be used to predict the trading area of a given shopping center or retail outlet based on relative size, travel time, and image. A variety of other techniques can be used to establish trading areas. An analysis of the addresses of the credit card customers or license plates of the cars (by plotting the addresses of the car owners) can provide a useful estimate of the trading area. Check-clearance data can be used to supplement this information. The best, but also the most expensive way of establishing trading area bound Aries is to conduct surveys to determine them.
iv. Outlet location research. Individual companies and, more commonly, chains, financial institutions with multiple outlets, and franchise operations must decide on the physical location of their outlet(s). Three general methods involves plotting the area surrounding the potential site in terms of residential neighborhood, income levels, and competitive stores. Regression models have been used for location studies for a variety of retail outlets, including banks, grocery stores, liquor stores, chain stores and hotels. Data for building the model and for evaluating new potential locations are obtained through secondary data analysis and surveys.
b. Number and location of Sales Representatives
How many sales representatives should be in a given territory? There are three general research methods for answering this question.
• The first, the sales effort approach, is applicable when the product line is first introduced and there is no operating history to provide sales data.
• The second involves the statistical analysis of sales data and can be used after the sales program is under way.
• The third involves a field experiment and is also applicable only after the sales program has begun.
IV. Promotion research
It focuses on the decision that are commonly made when designing a promotion strategy.
The decision for the promotion part of a marketing strategy can be divided in to
(1) Advertising and
(2) Sales promotion.
Sales promotion affects the company in the short term, whereas advertising decisions have long-term effects. Companies spend more time and resources on advertising research than on sales promotion research because of the greater risk and uncertainty in advertising research.
1. Advertising research
Most companies concentrate on advertising because advertising decisions are more costly and risky than sales promotion decisions. Advertiseing reasearch typically, involves generating information for making decisions in the awareness, recognition, preference and purchasing stages.
What separates an effective advertisement from a dud? The criteria will depend, on th brand involved and its advertising objective. However, four basic categories of responses are used in advertising research in general and copy testing in particular:
a) Advertisement recognition
b) Recall of the commercial and its contents
c) The measure of commercial persuasion and the impact on purchase behavior.
• Purchase behavior
- Coupon stimulating purchasing
- Split-cables tests. Information Resources Inc’s (IRI) BehaviorScan is one of several spilt-cable testing operations.
BehaviorScan monitors the purchases of panel members as well as in-store information such s special prices, features and displays.
• Tracking studies
When a campaign is running, its impact often is monitored via a tracking study Periodic sampling of the target audience provide a time trend of measures of interest.
The purpose is to evaluate and reassess the advertising campaign, and perhaps also to understand why it is or is not working. Among the measures that often are traced are advertisement awareness, awareness of elements of the advertisement, brand awareness, beliefs about brand attributes, brand image, occasions of use, and brand preference. Of particular interest is knowing how the campaign is affecting the brand, as opposed to how the advertisement is communicating the message.
• Diagnostics testing
A whole category of advertising research methods is designed primarily not to test the impact of a total ad but rather to help creative people understand how the parts of the ad contribute to its impact.
Which are weak and how do they interact? Most of these approaches can be applied to mock-ups of proposed ads as well as finished ads.
• Copy test validity
This test refers to the ability to predict advertising response.
• Budget decision
Arriving at analytical, research-based judgments as to the optimal advertising budget is surprisingly difficult. However, there are research inputs that can be helpful.
Tracking studies that show advertising is either surpassing or failing to reach communication objectives can suggest that the budget should be either reduced or increased.
• Media research
In evaluating a particular media alternative, it is necessary to know how many advertising exposures it will deliver and what will be the characteristics of the audience.
A first cut of the vehicle’s value is the cost per thousand (circulation), the advertisement insertion cost divided by the size of the audience.
2. Sales Promotion Research
There are three major types of sales promotion: consumer promotion, retailer promotion and trade promotions.
In general, the consumer promotion, manufactures offer of all sales promotion activities. In consumer promotion, manufacturers offer promotions promotions directly to consumers, whereas retail promotions involve promotions by retailers to consumers. Trade promotions involve manufacturers offering promotions to retailers or other trade entities. Trade entities can also promote to each other.
For example ,a distributor can offer a steep temporary price cut to retailers in order to sell excess inventory. We call trade promotions, since the recipient of the promotion is a marketing intermediary.
Sometimes several manufacturers or several retailers combine in one promotion. These are called cooperative promotions or promotion partnerships.