Market Test Method

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Where buyers do not plan their purchases carefully or experts are not available or reliable, a direct market test is desirable. A direct market test is especially desirable in forecasting new-product sales or established product sales in a new distribution channel or territory.

1. Three developments make the need for marketing information greater now than at any time in the past: the rise of global marketing, the new emphasis on buyers' wants, and the trend toward nonprice competition.

2. To carry out their analysis, planning, implementation, and control responsibilities, marketing managers need a marketing information system (MIS). The MIS's role is to assess the managers' information needs, develop the needed information, and distribute that information in a timely manner.

3. An MIS has four components: (a) an internal records system, which includes information on the order-to-payment cycle and sales reporting systems; (b) a marketing intelligence system, a set of procedures and sources used by managers to obtain everyday information about pertinent developments in the marketing environment; (c) a marketing research system that allows for the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation; and (d) a computerized marketing decision support system that helps managers interpret relevant information and turn it into a basis for marketing action.

4. Companies can conduct their own marketing research or hire other companies to do it for them. 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.

5. The process consists of defining the problem and research objective, developing the research plan, collecting the information, analyzing the information, and presenting the findings to management. In conducting research, firms must decide whether to collect their own data or use data that already exist. They must also decide which research approach (observational, focus-group, survey, behavioral data, or experimental) and which research instrument (questionnaire or mechanical instruments) to use. In addition, they must decide on a sampling plan and contact methods.

6. One major reason for undertaking marketing research is to discover market opportunities. Once the research is complete, the company must carefully evaluate its opportunities and decide which markets to enter. Once in the market, it must prepare sales forecasts based on estimates of demand.

7. There are two types of demand: market demand and company demand. To estimate current demand, companies attempt to determine total market potential, area market potential, industry sales, and market share. To estimate future demand,

SUMMARY

companies survey buyers' intentions, solicit their sales force's input, gather expert opinions, 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.

and low company market budget are 0.30, 0.50, and 0.20, respectively. How might the forecaster arrive at a single-point sales forecast? What assumptions are being made?

NOTES

1. See James C. Anderson and James A. Narus, Business Market Management: Understanding, Creating and Delivering Value (Upper Saddle River, NJ: Prentice Hall, 1998), Chap. 2.

2. John Koten, "You Aren't Paranoid if You Feel Someone Eyes You Constantly," Wall Street Journal, March 29, 1985, pp.

1, 22; "Offbeat Marketing," Sales & Marketing Management, January 199G, p. 35; and Erik Larson, "Attention Shoppers: Don't Look Now but You Are Being Tailed," Smithsonian Magazine, January 1993, pp. 7G-79.

3. From Consumer Europe 1993, a publication of Euromonitor, pnc. London: Tel +4471 251 8G21; U.S. offices: (312) 541-

8024.

4. Donna DeEulio, "Should Catalogers Travel the EDI Highway?" Catalog Age 11, no. 2 (February 1994): 99.

5. John W. Verity, "Taking a Laptop on a Call," Business Week, October 25, 1993, pp. 124-25.

6. Stannie Holt, "Sales-Force Automation Ramps Up," InfoWorld, March 23, 1998, pp. 29, 38.

7. James A. Narus and James C. Anderson, "Turn Your Industrial Distributors into Partners," Harvard Business Review, March-April 1986, pp. 66-71.

8. Kevin Helliker, "Smile: That Cranky Shopper May Be a Store Spy," Wall Street Journal, November 30, 1994, pp. B1, B6.

9. Don Peppers, "How You Can Help Them," Fast Company, October-November 1997, pp. 128-36.

10. See 1994 Survey of Market Research, eds. Thomas Kinnear and Ann Root (Chicago: American Marketing Association, 1994).

11. See William R. BonDurant, "Research: The 'HP Way,'" Marketing Research, June 1992, pp. 28-33.

12. Kevin J. Clancy and Robert S. Shulman, Marketing Myths That Are Killing Business, (New York: McGraw-Hill, 1994), p. 58; Phaedra Hise, "Comprehensive CompuServe," Inc., June 1994, p. 109; "Business Bulletin: Studying the Competition," Wall Street Journal, p. A1.5.

13. For a discussion of the decision-theory approach to the value of research, see Donald R. Lehmann, Sunil Gupta, and Joel Steckel, Market Research (Reading, MA: Addison-Wesley, 1997).

14. For an excellent annotated reference to major secondary sources of business and marketing data, see Gilbert A. Churchill Jr., Marketing Research: Methodological Foundations, 6th ed. (Fort Worth, TX: Dryden, 1995).

15. Thomas L. Greenbaum, The Handbook for Focus Group Research (New York: Lexington Books, 1993).

16. Sarah Schafer, "Communications: Getting a Line on Customers," Inc. Tech (1996), p. 102; see also Alexia Parks, "OnLine Focus Groups Reshape Market Research Industry," Marketing News, May 12, l997, p. 28.

17. Roger D. Blackwell, James S. Hensel, Michael B. Phillips, and Brian Sternthal, Laboratory Equipment for Marketing Research (Dubuque, IA: Kendall/Hunt, 1970); and Wally Wood, "The Race to Replace Memory," Marketing and Media Decisions, July 1986, pp. 166-67. See also Gerald Zaltman, "Rethinking Market Research: Putting People Back In," Journal of Marketing Research 34, no. 4 (November 1997): 424-37.

18. Chris Serb, "If You Liked the Food, Press 1," Hospitals and Health Networks, April 5, 1997, p. 99.

19. G. K. Sharman, "Sessions Challenge Status Quo," Marketing News, November 10, 1997, p. 18; "Prepaid Phone Cards Are Revolutionizing Market Research Techniques," Direct Marketing, March l998, p. 12.

20. Selwyn Feinstein, "Computers Replacing Interviewers for Personnel and Marketing Tasks," Wall Street Journal, October 9, 1986, p. 35.

21. For further reading, see Joanne Lipman, "Single-Source Ad Research Heralds Detailed Look at Household Habits," Wall Street Journal, February 16, 1988, p. 39; Joe Schwartz, "Back to the Source," American Demographics, January 1989, pp. 22-26; and Magid H. Abraham and Leonard M. Lodish, "Getting the Most Out of Advertising and Promotions," Harvard Business Review, May-June 1990, pp. 50-60.

22. John D. C. Little, "Decision Support Systems for Marketing Managers," Journal of Marketing, Summer 1979, p. 11.

23. Gary L. Lilien and Arvind Rangaswamy, Marketing Engineering: Computer-Assisted Marketing Analysis and Planning (Reading, MA: Addison Wesley, 1998).

24. John D. C. Little, "BRANDAID: A Marketing Mix Model, Part I: Structure; Part II: Implementation," Operations Research 23 (1975): 628-73.

25. Leonard M. Lodish, "CALLPLAN: An Interactive Salesman's Call Planning System," Management Science, December 1971, pp. 25-40.

26. David B. Montgomery, Alvin J. Silk, and C. E. Zaragoza, "A Multiple-Product Sales-Force Allocation Model," Management Science, December 1971, pp. 3-24.

27. S. W. Hess and S. A. Samuels, "Experiences with a Sales Districting Model: Criteria and Implementation," Management Science, December 1971, pp. 41-54.

28. John D. C. Little and Leonard M. Lodish, "A Media Planning Calculus," Operations Research, January-February 1969, pp. 1-35.

29. Magid M. Abraham and Leonard M. Lodish, "PROMOTER: An Automated Promotion Evaluation System," Marketing Science, Spring 1987, pp. 101-23.

30. Raymond R. Burke, Arvind Rangaswamy, Jerry Wind, and Jehoshua Eliashberg, "A Knowledge-Based System for Advertising Design," Marketing Science 9, no. 3 (1990): 212-29.

31. John D. C. Little, "Cover Story: An Expert System to Find the News in Scanner

Data," Sloan School, MIT Working Paper, 1988.

32. Robert Berner, "Image Ads Catch the Imagination of Dayton Hudson's Target Unit," Wall Street Journal, October 3, 1997, p. B5.

33. For further discussion, see Gary L. Lilien, Philip Kotier, and K. Sridhar Moorthy, Marketing Models (Upper Saddle River, NJ: Prentice Hall, 1992).

34. See Russell L. Ackoff, A Concept of Corporate Planning (New York: Wiley-Inter-science, 1970), pp. 36-37.

35. For more information on NAICS, check the U.S. Bureau of the Census Web site, www.census.gov/epcd/www/naics.html.

36. For suggested strategies related to the market area's BDI standing, see Don E. Schultz, Dennis Martin, and William P.

Brown, Strategic Advertising Campaigns (Chicago: Crain Books, 1984), p. 338.

37. Jeff Harrington, "Juiced-Up Orange Juice? Yuck, Buyers Say: Today AcuPOLL releases 10 Best and Six Worst New Products of '97," Detroit News, December 7, 1997, p. D3.

38. See Jacob Gonik, "Tie Salesmen's Bonuses to Their Forecasts," Harvard Business Review, May-June 1978, pp. 116-23.

39. See Norman Dalkey and Olaf Helmer, "An Experimental Application of the Delphi Method to the Use of Experts," Management Science, April 1963, pp. 458-67. Also see Roger J. Best, "An Experiment in Delphi Estimation in Marketing Decision Making," Journal of Marketing Research, November 1974, pp.

SECTION TWO

Successful companies take an outside-inside view of their business. They recognize that the marketing environment is constantly spinning new opportunities and threats and understand the importance of continuously monitoring and adapting to that environment. One company that has continually reinvented one of its brands to keep up with the changing marketing environment is Mattel with its Barbie doll:1

■ Ma Mattel's genius is in keeping its Barbie doll both timeless and trendy. Since Barbie's creation in 1959, the doll has filled a fundamental need that all girls share: to play a grown-up. Yet Barbie has changed as girls' dreams have changed. Her aspirations have evolved from jobs like "stewardess," "fashion model," and "nurse," to "astronaut," "rock singer," and "presidential candidate." Mattel introduces new Barbie dolls every year in order to keep up with the latest definitions of achievement, glamour, romance, adventure, and nurturing. Barbie also reflects America's diverse population. Mattel has produced African American Barbie dolls since 1968— the time of the civil rights movement—and the company has introduced Hispanic and Asian dolls as well. In recent years, Mattel has introduced the Crystal Barbie doll (a gorgeous glamour doll), Puerto Rican Barbie (part of its "dolls of the world" collection), Great Shape Barbie (to tie into the fitness craze), Flight Time Barbie (a pilot), and Troll and Baywatch Barbies (to tie into kids' fads and TV shows). Industry analysts estimate that two Barbie dolls are sold every second and that the average American girl owns eight versions of Barbie. Every year since 1993, sales of the perky plastic doll have exceeded $1 billion.

Many companies fail to see change as opportunity. They ignore or resist changes until it is too late. Their strategies, structures, systems, and organizational culture grow increasingly obsolete and dysfunctional. Corporations as mighty as General Motors, IBM, and Sears have passed through difficult times because they ignored macroenvironmental changes too long.

The major responsibility for identifying significant marketplace changes falls to the company's marketers. More than any other group in the company, they must be the trend trackers and opportunity seekers. Although every manager in an organization needs to observe the outside environment, marketers have two advantages: They have disciplined methods—marketing intelligence and marketing research—for collecting information about the marketing environment. They also spend more time with customers and more time watching competitors.

We examine the firm's external environment —the macroenvironment forces that affect it, its consumer markets, its business markets, and its competitors.

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