Marketing Research

Scope of Business Research

n What is your definition of

business?
l For profit corporations
l Not for profit organizations

l Government Departments
Definition

Marketing Research is defined as

the systematic and objective
process of gathering, recording,
recording,
and analyzing data for aid in
making Marketing decisions.
decisions.
Basic vs. Applied

n Basic / Pure Research

l Research that is intended to expand the
boundaries of knowledge itself or to
verify the acceptability of a given theory.
n Applied Research
l Research undertaken to answer
questions about specific problems or to
make decisions about a particular
course of action or policy decision.
When is Business Research
Needed?
n Time Constraints
l Urgency of situation precludes the
use of research
n Availability of data
l Many African nations have never
conducted population census
n Nature of Decision
l Tactical vs. Strategic
n Benefits vs. Costs
n Data
l Recorded measures of certain
phenomenon
n Information
l A body of facts that in a format suitable
for decision making
n Knowledge
l A blend of information, experience and
insight that provide a framework that
can be thoughtfully applied when
assessing new information or evaluating
relevant situations
Types of Business Research

n Exploratory
l Initial research conducted to clarify and
define the nature of a problem
l “Absenteeism is increasing and we don’t
know why”
l “Would people be interested in our new
product idea?”
l “What task conditions influence the
leadership process in our organization?”
Types of Business Research

n Descriptive
l Research designed to describe
characteristics of a population or a
phenomenon
l “What kind of people favor our
services?”
l “Did last year’s product recall have an
impact on our company’s stock price?”
l “Has the average rate of savings and
loans increased in the past decade?”
Types of Business Research

n Causal Research
l Research conducted to identify cause
and effect relationships among variables
when the research problem has been
narrowly defined.
l “Which of the two training programs is
more effective?”
l “Can I predict the value of energy stocks
if I know the current dividends growth
rates of dividends?”
l “Will buyers purchase more of our
product in a new package?”
Which Type of Research?

n Establishing the functional

relationship between advertising and
sales
n Identifying target-
target-market
demographics for a shopping centre
n Learning the extent of job
satisfaction in a company
n Investigating reactions to the idea of
a new telecom policy
 You work for CHILDCO, a corporation that is considering
the acquisition of a toy manufacturer.

The senior vice president for development asks you to head

a task force to investigate six companies that are
potential candidates.

You assemble a team composed of representatives from

the relevant functional areas. Pertinent data are
collected from public sources because of the sensitive
nature of the project.
You examine all of the following: company annual reports;
articles in business journals, trade magazines, and
newspapers; financial analysts’ assessments; and
company advertisements. The team members then
develop summary profiles of the candidate firms based
on the characteristics gleaned from the sources.

The final report highlights the opportunities and problems

that acquisition of the target firm would bring to all areas
of the business.
n What is the dilemma facing the
manager?
l the senior vice president for
development must make a proposal to
the president or possibly the board of
directors about whether to acquire a toy
manufacturer and, if one is to be
acquired, which one of the six under
consideration is the best candidate.
n What must the research accomplish?
l the researcher needs to know what information
should be evaluated in order to value a
company.
l In the study of management, this knowledge
would be acquired primarily in courses in
financial management, accounting, and
marketing.
l Knowing the type of information needed, the
researcher in CHILDCO identifies sources of
information, like trade press articles and annual
reports.
l Because of the possible effect of the toy
manufacturer evaluation on the stock prices of
the conglomerate instigating the study and each
toy company, only public sources are used.
Case 2
ColorSplash, a paint manufacturer, is having trouble
maintaining profits. The owner believes inventory
management is a weak area of the company’s
operations.

In this industry, the many paint colors, types of paint,

and container sizes make it easy for a firm to
accumulate large inventories and still be unable to
fill customer orders. The owner asks you to make
recommendations.

You look into the present warehousing and shipping

operations and find excessive sales losses and
delivery delays because of out-of-stock conditions.
An informal poll of customers confirms your
impression.

You suspect the present inventory database and

reporting system do not provide the prompt, usable
information needed for appropriate production
decisions.
Based on this supposition, you familiarize yourself with
the latest inventory management techniques in a
local college library. You ask the warehouse
manager to take an accurate inventory, and you
review the incoming orders for the last year.

In addition, the owner shows you the production runs

of the last year and his method for assessing the
need for a particular color or paint type.

Modeling the last year of business using production,

order, and inventory management techniques, you
choose the method that provides the best
theoretical profit.

You run a pilot line using the new control methodology.

After two months, the data show a much lower
inventory and a higher order fulfillment rate. You
recommend that the owner adopt the new inventory
method.
n What is the dilemma facing the
manager?
l the owner of the paint
manufacturer must decide
whether to implement a new
inventory management system.
n What must the research accomplish?
l believing the problem with paint stockouts is the
result of inventory management, the owner asks
the researcher to detail warehousing and
shipping processes. This would be a descriptive
study if it had stopped here.
l But if problems in the processes could be linked
with sales losses due to an inability to make
timely deliveries to retail or wholesale
customers, then an explanatory study would
emerge.
l The researcher tests this hypothesis by
modeling the last year of business using the
relationships between processes and results.
Research Process
 Clarifying the
Research
Question

Research
Proposal

Research Design
Strategy

Data Collection Design

Sampling Design

Instrument Design & Testing

Data Collection & Preparation

Data Analysis & Interpretation

Research Reporting / Management Decision

 Management Research Question
Hierarchy

Recommended course of Action

Management Decision
6
What should be asked or observed to obtain
Measurement Questions
5 the information the manager needs?
What does the manager need to know to select
Investigative Questions
4 the best alternative?

Research Question(s)
3 What plausible courses of action are available to management?

Management Question
2 How can management eliminate the negative symptoms?

Management Dilemma
1 What symptoms cause management concern?
Problem Discovery

n “A problem well defined is a problem

half solved”
n “The formulation of problem is often
more essential than its solution”
n Most important and frequently
neglected area of research
n Exploratory research to transform
the discovered problem into defined
ones, incorporating specific research
objectives
Research Design

n A master plan specifying the

methods and procedures for
collecting and analyzing the
needed information
l Surveys
l Experiments

l Secondary Data Studies

l Observation Techniques
Survey Research

n A method of gathering primary

data based on communication
with a representative sample of
individuals.
Classification

Structured Unstructured
Undisguised Undisguised

Structured Unstructured
Disguised Disguised
Temporal Basis

n Cross Sectional Studies

l Various segments of a population
are sampled at a single point in
time.
n Longitudinal Studies
l Respondents are questioned at
different moments of time
Methods of Communication

n Human Interactive Media

l Personal Interview
l Door
Door--to
to--Door Interviews
l Mall Intercept Interviews

n Electronic Interactive Media

l Telephone Interview
l Computer Assisted Telephone
Interviewing (CATI)
Methods of Communication

n Non Interactive Media

l Self Administered Questionnaires
l Mail Questionnaires

l Email Surveys

l Internet Surveys

l Kiosk Surveys
 Errors in Survey Research
Respondent Respondent
Error Error

Random Respondent
Sampling Error Error

Data
Total Error Processing Error

Sample Selection
Systematic Error
Error (Bias)
Interviewer
Error
Administrative
Error
Interviewer
Cheating
Sampling

n Process of using a small

number of items or parts of a
larger population to make
conclusions about the whole
population
Stages in Selection of Sample

n Define the target population

l The specific, complete group
relevant to the research project
n The Sampling Frame
l Working population
n Sampling Unit
n Sampling Technique
Sampling Methods

n Probability Sampling
l In which every member of the
population has a known, non zero
probability of selection
n Non Probability Sampling
l In which units of the sample are
selected on the basis of personal
judgment or convenience
Non Probability Sampling

n Convenience Sampling
n Judgment or Purposive
Sampling
n Quota Sampling
n Snowball Sampling
Probability Sampling

n Simple Random Sampling

n Systematic Sampling
l Every 5th name from the list would
be drawn
n Stratified Sampling
l Simple random sub samples are
drawn from within different strata’s
n Cluster Sampling
n Multistage Area Sampling
Sampling Error

n The absolute value of the

difference between an unbiased
estimate and the corresponding
population parameter.
l Because sample results
(statistics) are based on partial or
incomplete analysis of population
features (or characterstics)
n Population Parameter
l An exact, but generally unknown
measure (or value) which
describes the entire population or
process characteristic
n Sample Statistic
l A measure (or value) found from
analyzing sample data.
Principles of Sampling

n Principle of Statistical Regularity

l That moderately large number of
items chosen at random from a
large group are almost sure on the
average to process the
characteristics of a large group
n Principle of Inertia of Large
Numbers
Sampling Distribution

n A probability distribution
consisting of all possible values
of a sample statistic
n Standard Error of Statistic –
Standard Deviation of sampling
distribution of sampling statistic
Central Limit Theorem

n When a random sample of

observations are drawn from a non-
non-
normal population with finite mean µ,
and as the sample size n is
increased, the sampling distribution
of the sample mean is approximately
normally distributed, with mean and
standard deviation as
n Mean = µ and
n Standard Deviation = s / vn
Value of n

n If the sampled population is normal,

then the sampling distribution of
mean will also be normal regardless
of the size of the sample
n If the sampled population is not
normal or is skewed, the sample size
must be larger, with atleast 30 before
the sampling distribution of mean
becomes approximately normal
I) Population - Normal

n (A) – Population Standard

Deviation s is known
n Standard Normal Variate
n Z = (x-
(x-µ)/(
µ)/(s
s /vn)
n (B) – Population Standard
Deviation is not known
n t= (x-
(x-µ)/(s/vn), where
n (x-mean)2 /(n
s= v( (x- /(n--1)
Case I

n A motorcycle manufacturing
company claims that its particular
brand of motorcycle gave an
average highway km per litre rating
of 90.
n An independent agency tested it to
verify the claim. Under controlled
conditions, the motor cycle was
driven for a distance of 100 km on
each of 25 different occasions.
Case I

n The actual km per litre achieved

during the trip were recorded on
each occasion.
n Over 25 trials, the average and the
standard deviation turned out to be
87 and 5 respectively
n If the rating of 90 km is correct, find
the probability that the average kms
per litre over a random sample of 25
trials would be 87 or less.
Case II

n The strength of wire produced by

company A has a mean of 4500 Kg
and a standard deviation of 200 Kg.
Company B has a mean of 4000 Kg
and a standard deviation of 300 Kg
n If 50 wires of company A and 100
wires of company B are selected at
random, what is the probability that
the sample mean strength of A will
be atleast 600 Kg more than that of
B?
Case III

n A manufacturer of watches has

determined from experience that
3 percent of the watches he
produces are defective. If a
random sample of 300 watches
is examined, what is the
probability that the proportion
defective is between 0.02 and
0.035?
Standard Values
Confidence Acceptable a/2 Z
Level Error
(1--a)%
(1 Level (a
(a)
90% 0.10 0.05 +/-- 1.64
+/

95% 0.05 0.025 +/-- 1.96

+/

98% 0.02 0.01 +/-- 2.33

+/

99% 0.01 0.005 +/-- 2.58

+/
 Confidence Interval
Large n>=30 Small n<30

s is known

Z -distribution Z-distribution
s is not known

Z – distribution t-distribution
(s is estimated by s) (s is estimated by s)
Case

n The following data have been

collected for a sample of normal
population : 5,10, 8, 11, 12, 6,
15, 13
l What is the point estimate of
population mean and standard
deviation?
l What is the confidence interval for
population mean at 95%
confidence interval?
Case
n The HRD department of a company
developed an aptitude test for screening
potential employees. The person who
devised the test asserted that the mean
mark attained would be 100.
n The following results were obtained with a
random sample of applications (mean = 96,
s=5.2, n=13).
n Calculate a 95% confidence interval for the
mean mark for all candidates and use it to
see if the mean mark could be 100
Case

n In a survey carried out in a large city,

170 households out of a random
sample of 250 owned at least one
pet.
n Find the 95% confidence interval for
the percentage of households in the
city who own at least one pet.
n Does the result support a pet
manufacturer claim that 75 percent
of all households have at least one
pet
Hypothesis Testing

n A statistical hypothesis is a
claim (assertion, statement,
belief or assumption) about an
unknown population parameter
n The process that enables a
decision maker to test the
validity of his claim is called
hypothesis testing
Formats of Hypothesis

n If inflation rate has decreased, then

wholesale price index will also
decrease
n If employees are healthy, then they
will take sick leave less frequently
n Greater the stress experienced in the
job, lower the job satisfaction to
employees
n Directional Hypothesis
Formats of Hypothesis

n There is relationship between

age and job satisfaction
n There is difference between
average pulse rates of men and
women
n Non--Directional Hypothesis
Non
General Procedure

n State the Null Hypothesis (H0) and

Alternative Hypothesis (H1)
n State the Level of Significance (a
(a )
n Establish Critical or Rejection Region
n Select the suitable test of
significance or Test statistic
n Formulate the Decision Rule to
Accept Null Hypothesis
Errors in Hypothesis Testing

Decision State of Nature

H0 is true H0 is False

Accept H0 Correct Type II

Error (ß
(ß)
Reject H0 Type I Error Correct
(a )
Case

n The mean life of a sample of 400

bulbs produced by a company is
found to be 1600 hours, with a
standard deviation of 150 hours
n Test the hypothesis that the mean
life time of the bulbs produced in
general is higher than the mean life
of 1570 hours at 1% level of
significance