Step 2 Develop the Research Plan

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The second stage of marketing research calls for developing the most efficient plan for gathering the needed information. The marketing manager needs to know the cost of the research plan before approving it. Suppose the company estimates that launching the in-flight phone service would yield a long-term profit of $50,000. The manager believes that doing the research would lead to an improved pricing and promotional plan and a long-term profit of $90,000. In this case, the manager should be willing to spend up to $40,000 on this research. If the research would cost more than $40,000, it is not worth doing.13 Designing a research plan calls for decisions on the data sources, research approaches, research instruments, sampling plan, and contact methods.

Data Sources. The researcher can gather secondary data, primary data, or both. Secondary data are data that were collected for another purpose and already exist somewhere. Primary data are data gathered for a specific purpose or for a specific research project.

Researchers usually start their investigation by examining secondary data to see whether their problem can be partly or wholly solved without collecting costly primary data. (Table 1.2 shows the rich variety of secondary-data sources available in the United States.)14 Secondary data provide a starting point for research and offer the advantages of low cost and ready availability.

The Internet, or more particularly, the World Wide Web, is now the greatest repository of information the world has seen. In an incredibly short span of time, the Web has become a key tool for sales and marketing professionals to access competitive information or conduct demographic, industry, or customer research. See the Marketing Memo "Secondary Sources of Data On-line" for a minidirectory of sites where you can conduct free or at least inexpensive market research.

When the needed data do not exist or are dated, inaccurate, incomplete, or unreliable, the researcher will have to collect primary data. Most marketing research projects involve some primary-data collection. The normal procedure is to interview some people individually or in groups to get a sense of how people feel about the topic in question and then develop a formal research instrument, debug it, and carry it into the field.

When stored and used properly, the data collected in the field can form the backbone of later marketing campaigns. Direct marketers such as record clubs, credit-card companies, and catalog houses have long understood the power of database marketing.

■ A customer or prospect database is an organized collection of comprehensive data about individual customers, prospects, or suspects that is current, accessible, and actionable for marketing purposes such as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships.

Some techniques that are becoming increasingly popular are data warehousing and data mining—but they are not without risks. See the Marketing for the Millennium box, "Companies Turn to Data Warehousing and Data Mining: Exercise Care."

Research Approaches. Primary data can be collected in five ways: observation, focus groups, surveys, behavioral data, and experiments.

■ Observational research: Fresh data can be gathered by observing the relevant actors and settings. The American Airlines researchers might meander around airports, airline offices, and travel agencies to hear how travelers talk about the different carriers. The researchers can fly on American and competitors' planes to observe the quality of in-flight service. This exploratory research might yield some useful hypotheses about how travelers choose air carriers.

■ Focus-group research: A focus group is a gathering of six to ten people who are invited to spend a few hours with a skilled moderator to discuss a product, service, organization, or other marketing entity. The moderator needs to be objective, knowledgeable on the issue, and skilled in group dynamics. Participants are normally paid a small sum for attending. The meeting is typically held in pleasant surroundings and refreshments are served.

In the American Airlines research, the moderator might start with a broad question, such as "How do you feel about air travel?" Questions then move to how people regard the different airlines, different services, and in-flight telephone service. The moderator encourages free and easy discussion, hoping that the group dynamics will reveal deep feelings and thoughts. At the same time, the moderator "focuses" the discussion. The discussion, recorded through note taking or on audiotape or videotape, is subsequently studied to understand consumer beliefs, attitudes, and behavior.

Focus-group research is a useful exploratory step. Consumer-goods companies have been using focus groups for many years, and an increasing number of newspapers, law firms, hospitals and public-service organizations are discovering


■ National Trade Data Bank—free access to over 18,000 market research reports analyzing trends and competition in scores of industries and for hundreds of products (

■ Public Register's Annual Report Service—allows searches of 3,200 public companies by company name or industry and offers annual reports via e-mail (

■ Quote.Com—access to a wide range of business wires, companies'directo-ries, and stock quotes (

Government Information

■ Census Bureau (

■ FedWorld—a clearinghouse for over 100 federal government agencies (

■ Thomas—indexes federal government sites (

■ Trade/Exporting/business:Stat-USA (

■ US Business Advisor (

International Information

■ CIA World Factbook—a comprehensive statistical and demographic directory covering 264 countries around the world (

■ The Electronic Embassy (

■ I-lrade—free and fee-based information services for firms wishing to do business internationally (

■ The United Nations (

Sources: Based on information from Robert I. Berk-man, Find It Fast: How to Uncover Expert Information on Any Subject in Print or Online (New York: HarperCollins, 1997); Christine Galea, "Surf City: The Best Places for Business on the Web,"Sales & Marketing Management,January 1997, pp. 69—73; David Curle, "Out-of-the-Way Sources of Market Research on the Web,"Online,January—February 1998,pp.63 -68.See also Jan Davis Tudor,"Brewing Up:A Web Approach to Industry Research," Online,July-August 1996, p. 12.

■ Survey research: Surveys are best suited for descriptive research. Companies undertake surveys to learn about people's knowledge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the general population. American Airlines researchers might want to survey how many people know American, have flown it, prefer it, and would like telephone availability.

■ Behavioral data: Customers leave traces of their purchasing behavior in store scanning data, catalog purchase records, and customer databases. Much can be learned by analyzing this data. Customers' actual purchases reflect revealed preferences and often are more reliable than statements they offer to market researchers. People often report preferences for popular brands, and yet the data show them actually buying other brands. For example, grocery shopping data show that high-income people do not necessarily buy the more expensive brands, contrary to what they might state in interviews; and many low-income people buy some expensive brands. Clearly American Airlines can learn many useful things about its passengers by analyzing ticket purchase records.

■ Experimental research: The most scientifically valid research is experimental research. The purpose of experimental research is to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. To the extent that the design and execution of the experiment eliminate alternative hypotheses that might explain the results, the research and marketing managers can have confidence in the conclusions. It calls for selecting matched groups of subjects, subjecting them to different treatments, controlling extraneous variables, and checking whether observed response differences are statistically significant. To the extent that extraneous factors are eliminated or controlled, the observed effects can be related to the variations in the treatments.

American Airlines might introduce in-flight phone service on one of its regular flights from New York to Los Angeles at a price of $25 a phone call. On the same flight the following day, it announces the availability of this service at $15 a phone call. If the plane carried the same number and type of passengers on each flight, and the day of the week made no difference, any significant difference in the number of Gathering Information calls made could be related to the price charged. The experimental design could be and Measuring elaborated further by trying other prices, replicating the same prices on a number of Market Demand flights, and including other air routes in the experiment.

back of being nonprobability samples, and the interviews must not require too much time.

There is increased use of on-line interviewing. A company can include a questionnaire at its Web page and offer an incentive to answer the questionnaire. Or it can place a banner on some frequently visited site inviting people to answer some questions and possibly win a prize. Or the company can enter a target chat room and seek volunteers for a survey. In collecting data on-line, however, the company must recognize the data's limitations. The company cannot assume that the data are representative of a target population, because the respondents are self-selected. People in the target market who do not use the Internet or who don't want to answer a questionnaire can bias the results. Still the information can be useful for exploratory research in suggesting hypotheses that might be investigated in a more scientific subsequent survey.

Many companies are now using automated telephone surveys to solicit market research information. MetroHealth Systems in Cleveland used to have a dismal return rate of 50 percent on its paper patient-satisfaction surveys. Then the company teamed up with Sprint Healthcare systems of Overland Park, Kansas, to deliver an interactive phone survey. Under the pilot project, patients who left the hospital received a phone card with a toll-free number. When they dialed, a recording asked them several questions about their hospital experience. Results that once took months to sort now came back in a few days, and more patients completed the survey.18

And how do you provide incentives for customers to answer your automated survey? One popular approach is to use prepaid phone cards as an incentive. A survey is programmed into an interactive call system that not only administers the survey but also sorts the results virtually any way the client wants them. Then the client distributes the calling cards to its selected market segment. When the call users place their free calls, a voice prompt asks them if they would like to gain additional minutes by taking a short survey. NBC, Coca-Cola, and Amoco are some of the companies that have used prepaid phone cards to survey their customers.19

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