CHAPTER

5 CONDUCTING MARKETING
RESEARCH

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

5.1 Define the scope of marketing research.

5.2 Explain the marketing research process, how to gather and analyze market
data, and how to develop a research plan.
5.3 Explain how to measure and forecast market demand.
5.4 Define the different approaches to measuring marketing productivity.

CHAPTER SUMMARY

1. Marketing research is all about generating insights. Marketing insights provide

diagnostic information about how and why we observe certain effects in the
marketplace and what that means to marketers. Good marketing research is
characterized by the scientific method, creativity, multiple research methods,
accurate model building, cost–benefit analysis, healthy skepticism, and an ethical
focus.
2. The marketing research process consists of defining the problem, developing the
research plan, collecting information, analyzing the information, and making the
decision. In conducting research, firms must decide whether to collect their own
(primary) data or use data that already exist (secondary data). They must also
choose a research approach (observational, focus group, survey, or behavioral)
and research instruments (questionnaires, qualitative measures, or technological
devices). In addition, they must decide on a sampling plan, contact methods
(online, in person, mail or e-mail, or telephone), and data-mining strategies.
3. To estimate current demand, companies need to determine the size, growth, and
profit potential of each market opportunity. To estimate future demand,
companies survey buyers’ intentions, solicit the input of their sales forces, gather
expert opinions, analyze past sales, or engage in market testing. Mathematical
models, advanced statistical techniques, and computerized data collection
procedures are essential to all types of demand and sales forecasting.
4. Marketing research must assess the efficiency and effectiveness of marketing
activities. Two complementary approaches to measuring marketing productivity
are (1) marketing metrics to assess marketing effects and (2) marketing-mix
modeling to estimate causal relationships and measure how marketing activity
affects outcomes. The insights gleaned from these two approaches must be

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 disseminated within the organization. Marketing dashboards provide all the up-to-
the-minute information necessary to run the business operations for a company—
such as actual sales versus forecast, distribution channel effectiveness, brand-
equity evolution, and the development of human capital. Company input to the
marketing dashboard should include two key market-based scorecards that reflect
performance and provide possible early warning signals.

OPENING THOUGHT
Marketing research is a process in which consumers’ thoughts, actions, and purchase
intentions are collected to form the basis of marketing decisions. Most students will relate to
marketing research techniques where the insights are gained directly from a process of
transcribing and reviewing responses—focus groups, for instance—but will shy away from
the quantitative techniques/number crunching. If the analysis is presented as a “means to an
end”—a way to gain insights that make marketing decision making easier—then the process
should be accepted with greater enthusiasm.

In today’s world of marketing, marketing managers are increasingly being asked to justify
their expenditures. As a result, good marketing managers and good students of marketing
should be very comfortable with the analyses presented in this chapter.

To many of the students enrolled in marketing, the topics of statistics, analysis, and financial
modeling will cause their eyes to “roll in their heads” as the thought of calculating numbers
creates stress. The instructor is encouraged to assign practice with real-world examples, which
will make the numbers more meaningful, and to emphasize to the students that good
marketers need fluency with these techniques in order to get results that enable better
marketing decisions.

TEACHING STRATEGY AND CLASS ORGANIZATION

PROJECTS
1. At this point in the semester-long marketing plan project, the students’ initial
marketing research parameters should be completed, demand forecasted, and target
market selections defined.

2. Commission a marketing research study on topics of interest to the students at your

institution. During the course of the semester (15-16 weeks), have the students develop
the questionnaire, collection method, conduct the survey, and tabulate the results. The
students can be divided into groups for this project. Suggested topics can include the
students’ opinions of campus issues such as the athletic program, sale of alcohol, use and
availability of technology, or students’ perceptions of their current educational
experiences.

ASSIGNMENTS
Ask students to contact a local marketing research firm in the area for the purpose of an
interview regarding research techniques, methods, and the difficulties in conducting

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research. Pre-approve the set of questions prepared by the students prior to the
appointment. Ensure that the students will be able to collect information from the
research company regarding how information is collected. Once it is collected, what are
some of the difficulties faced by the researcher in presenting this information to the
client?

The American Airlines case shows the power of conducting marketing research before
offering a service. In small groups for an in-class discussion, have the students comment
on the case in light of the marketing research process examined in the chapter.

Have students watch this video on the concept of “neuromarketing” and comment on
whether such brain research is ethical, as it may lead to more marketing manipulation:
https://www.youtube.com/watch?v=LpJvuPOG40M. See also
http://www.businessweek.com/articles/2013-10-10/will-companies-one-day-use-
brainwaves-to-find-ideal-prices Carolyn Yoon, Angela H. Gutchess, Fred Feinberg, and
Thad A. Polk, “A Functional Magnetic Resonance Imaging Study of Neural
Dissociations Between Brand and Person Judgments,” Journal of Consumer Research, 33
(June 2006), pp. 31-40; Samuel M. McClure, Jian Li, Damon Tomlin, Kim S. Cypert,
Latané M. Montague, and P. Read Montague, “Neural Correlates of Behavioral
Preference for Culturally Familiar Drinks,” Neuron, 44 (October 14, 2004), pp. 379-387.

END-OF-CHAPTER SUPPORT

Marketing Spotlight: Tesco

1. Tesco saw massive success with the introduction of the Clubcard back in 1995. How do you
think a concept like Clubcard would fare today, now that the internet is commonplace and
customer data analysis is an industry of its own?

Suggested answer: Arguments may vary, but both success and failure can be justified. It
could be argued that in today’s world, this level of data and analysis is a necessity.
Therefore, the Clubcard would probably not have the same impact as it did earlier.
Though the advantage gained from data collection and analysis by Tesco in 1995 would
not be as game-changing today, effective marketing strategies would still require the right
kind of execution. In itself, the data might be a basic requirement today, but Tesco has
demonstrated that they know what to do with the data as well, even when competitors
started to have access to the same technology as them.

2. The COVID-19 pandemic saw a massive change in retail shopping as a whole. As more and
more customers have shifted to online purchasing, how might this impact Tesco’s ability to gain
customer insights based on their purchases, given that the new Clubcard Plus system is exempt
from online shopping?

Suggested answer: It can be argued that online purchases have the benefit of not needing
incentives in the same way that retail shopping does, which is why the Clubcard Plus
discounts do not apply. With online purchases, as each customer is typically logged into
their account for their household, all purchase data is automatically collected, and Tesco
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can instantly obtain insights from online shoppers. However, the Clubcard already offers
Tesco the advantage of informing them about which products to stock in abundance and
which promotions work (and when they work) in a retail setting.

3. In the end, IDEO creates great solutions for companies that then receive all the credit.
Should IDEO try to create more brand awareness for itself? Why or why not?

Suggested Answer: Students’ answers will vary—some will say “yes” and others will say
“no.” Answers should reflect on the nature of the company, its products, and its core
competency. What does the company do very well? It designs solutions for others. Good
answers will note that IDEO has created and commands a very well-defined “niche” in
the business world and is very successful in that niche, and any movement out of that
niche can be difficult and dangerous.

Marketing Spotlight: LEGO

1. How does LEGO manage to constantly reinvent its business?

Suggested answer: To revive the popularity of LEGO toys, Knudstorp focused heavily on
innovation and emphasized market and consumer research. Knudstorp believed that in
order to rekindle the emotional connection between customers and LEGO toys, LEGO
had to deeply understand each customer’s desires and behavior. LEGO’s shift toward
basing decisions on extensive research reduced complexity in production and ensured the
success of its product releases. In 2011, the company launched the LEGO Friends line, an
effort to attract more girls to the brand.

2. What role did marketing research play in LEGO’s market success?

Suggested answer: LEGO established the Future Lab, a secretive research and
development team that is responsible for creating some of its most innovative and
successful toy lines ever. Future Lab teams are made up of industrial designers,
programmers, marketers, and even master builders, who brainstorm to generate modern
products. Future Lab teams extensively brainstorm and produce prototypes from bins of
bricks, animation software, and professional-quality digital cameras.

3. What differentiates LEGO from its competitors? Is LEGO’s competitive advantage

sustainable?

Suggested answer: LEGO differentiates itself from its competitors through innovation.
Though LEGO has enjoyed great financial success since its all-time low in 2003,
company studies have indicated that kids spend less and less time playing with physical
toys every year. In an increasingly digital age, LEGO continues researching its customers
and experimenting with innovative product lines to stay at the top of the toy industry. If
LEGO continues to use market research and develops innovative products, it will sustain
its competitive advantage.

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DETAILED CHAPTER OUTLINE
To make the best possible tactical decisions in the short run and strategic decisions in the
long run, marketers need timely, accurate, and actionable information about consumers,
competition, and their brands. One company that helps marketers gain market insight and
better understand of ever-changing customer needs is Qualtrics. Qualtrics is the leader in
online marketing research software, offering an online platform that companies use to
collect, manage, and act on experience data. In this chapter, we review the scope of
marketing research and the steps involved in the marketing research process. We also
consider how marketers can develop effective metrics for measuring marketing
productivity.

I. The Scope of Marketing Research

A. Marketing research is the function that links the consumer, customer, and
public to the marketer through information.
i. The information is used to identify and define marketing
opportunities and problems; generate, refine, and evaluate marketing
actions; monitor marketing performance; and improve understanding
of marketing as a process.
ii. Marketing research specifies the information required to address
these issues, designs the method for collecting information, manages
and implements the data collection process, analyzes the results, and
communicates the findings and their implications.
B. Importance of Marketing Insights
i. Marketing insights provide diagnostic information about how
consumers and markets behave, why we observe certain effects in
the marketplace and what that means to marketers.
ii. Marketing insights can form the basis for successful marketing
programs, and gaining insights is crucial for marketing success.
C. Who Does Marketing Research?
i. Most large companies have their own marketing research
departments, which often play crucial roles within the organization.
ii. Smaller companies use everyone to carry out marketing research,
including customers, and they hire research firms or use affordable
methods like:
 Government sources
 Using the internet
 Observing competitors
 Buying mailing lists
 Tapping into employee creativity and wisdom
iii. Marketing research firms fall into three categories:
 Syndicated-service research firms
 Custom marketing research firms
 Specialty-line marketing research firms
II. The Marketing Research Process (See Fig. 5.1)
A. Defining the Problem
i. Do not define the problem too broadly or too narrowly.

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 ii. Some research is exploratory – the goal is to identify the problem and
to suggest possible solutions.
iii. Some research is descriptive—it seeks to quantify demand.
iv. Some research is causal—it tests a cause-and-effect relationship.
B. Developing the Research Plan
i. Develop the most efficient plan for gathering needed information.
ii. Discover what it will cost to execute the plan.
iii. Consider data sources.
 Secondary data—collected for another purpose; already exists
 Primary data—freshly gathered for a specific purpose or
project
iv. Consider research approaches.
 Observational research
 Ethnographic research
 Focus group research
 Survey research
 Behavioral research
v. Research instruments include:
 Questionnaires
o Closed-end questions specify all the possible answers,
and the responses are easier to interpret and tabulate.
o Open-end questions allow respondents to answer in
their own words.
 Qualitative measures
o Word association
o Projective techniques
o Visualization
o Brand personification
o Laddering
 Measurement devices
o Technology enables marketers to use skin sensors, brain
wave scanners, and full-body scanners to get consumer
responses.
C. Collecting the Information
i. Most expensive and error-prone phase
ii. Need to achieve consistency is one of the biggest obstacles
iii. Choose a sampling plan
 Sampling unit: whom should we survey?
 Sample size: How many people should we survey?
 Sampling procedure: How should we choose the respondents?
iv. Contact methods
 Mail contacts
 Telephone contacts
 Personal contacts
 Online contacts

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  Online research pros: inexpensive, expansive, fast, honest
responses, versatile
 Online research cons: samples small, skewed, technological
problems
v. Data Mining. Through data mining, marketing statisticians can
extract from the mass of data useful information about individuals,
trends, and segments.
vi. Companies use data mining to:
 Identify prospects
 Decide which customers should receive a particular offer
 Deepen customer loyalty
 Reactivate customer purchases
 Avoid serious customer mistakes
D. Analyzing the Information and Making the Decision
i. Extract findings by tabulating the data and developing summary measures.
ii. Test hypotheses and theories, applying sensitivity analysis to test
assumptions/strength of conclusions.
III. Measuring Market Demand
i. The company must measure and forecast the size, growth, and profit potential
of each new opportunity.
ii. Sales forecasts are used by finance to raise cash for investment and operations,
by manufacturing to establish capacity and output, by purchasing to acquire
the right amount of supplies, and by human resources to hire the needed
workers.
A. Key Concepts in Demand Measurement
i. Market demand for a product is the total volume that would be bought by a
defined customer group in a defined geographical area, in a defined time
period, and in a defined marketing environment under a defined marketing
program.
ii. Company demand is the company’s estimated share of market demand at
alternative levels of company marketing effort in a given time period.
iii. The market demand corresponding to the actual level of industry marketing
expenditure is called the market forecast.
iv. The company sales forecast is the expected level of company sales based on
a chosen marketing plan and an assumed marketing environment.
v. Total market potential consists of the maximum sales available to all firms in
an industry during a given period, under a given level of industry marketing
effort, and under extant environmental conditions.
vi. Company sales potential is the sales limit approached by company demand
as company marketing effort increases relative to that of competitors.
B. Forecasting Market Demand
i. Forecasting is the art of anticipating what buyers are likely to do under a
given set of conditions. For major consumer durables such as appliances,
research organizations conduct periodic surveys of consumer buying
intentions.
ii. Companies commonly prepare a macroeconomic forecast first, followed by

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 an industry forecast, followed by a company sales forecast.
iii.The macroeconomic forecast projects inflation, unemployment, interest
rates, consumer spending, business investment, government expenditures,
net exports, and other variables (forecast GDP).
iv. Companies buy forecasts from someone else.
v. They build a forecast on what people say, what people do, or what people
have done.
 Survey of buyers’ intentions
 Composite of sales force opinions
 Expert opinion
 Past sales analysis
 Market-test method
IV. Measuring Marketing Productivity
A. Marketing research must assess the efficiency and effectiveness of marketing
activities.
i. Two approaches to measuring marketing productivity are (1) marketing
metrics to assess marketing effects and (2) marketing-mix modeling to
estimate causal relationships and measure how marketing activity affects
outcomes.
ii. Marketing dashboards are a structured way to disseminate the insights
gleaned from these two approaches.
B. Marketing Metrics
i. Help marketers quantify, compare, and interpret performance
ii. Marketers choose one or more measures based on the issues they face.
 Website analytics detail site navigation and online interaction
 Social media presence shows demographic and geographic responses to
social media channels across different markets.
 Permission marketing statistics measure interactions and engagement with
consumers from automated e-mails.
C. Marketing-Mix Modeling
i. Marketing-mix models analyze data from a variety of sources such as retailer
scanner data and company shipment data, as well as pricing, media, and
promotion expenditure data, to understand more precisely the effects of
specific marketing activities.
ii. Limitations:
 Marketing-mix modeling focuses on incremental growth instead of on
baseline sales or long-term effects.
 The integration of important metrics such as customer satisfaction,
awareness, and brand equity into marketing-mix modeling is limited.
 Marketing-mix modeling generally fails to incorporate metrics related to
competitors, the trade, or the sales.
D. Marketing Dashboards
i. “A concise set of interconnected performance drivers to be viewed in
common throughout the organization”; a structured way to disseminate
insights gleaned from marketing metrics and marketing-mix modeling.
ii. Company input to the marketing dashboard should include two key market-

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 based scorecards: one that reflects performance and one that provides
possible early warning signals.
iii. An effective dashboard will focus thinking, improve internal
communications, and reveal where marketing investments are paying off
and where they aren’t.
iv. Measurement pathways include:
 Customer metrics
 Unit metrics
 Cash-flow metrics
 Brand metrics

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