CHAPTER 1—CASE

CASE 1-1 comes first. The Firefly phone has a number of safety
Preteen Market—The Right Place features that make it simpler to use than a conven-
to Be In for Cell Phone Providers? tional phone but harder to abuse. It does not have a
numerical keypad. Instead, parents can program up
Do parents of preteens envision a need for equipping to 20 phone numbers into the device which cannot
their children with cell phones? This seems to be the be changed without a password. Parents can also
million-dollar question facing cell phone makers like program the phone in such a way that it only accepts
Firefly who view the preteen market as offering more calls from certain numbers.
growth opportunities than the senior market. The preteen Firefly is not the only wireless carrier targeting the
market is unique in that the ultimate customer, the child, preteen market. Some providers offer regular cell
does not make the purchase decision. On one side of this phones at a steep discount for family plans. Wherify, a
indirect target market are parents with hectic or variable preteen phone specialist, is offering a kid phone that
schedules and those who are more harried or worried comes with a global positioning system locator—so
about their children’s safety. On the other side are par- parents can better track their offspring. Mattel Inc. is
ents who are skeptical about the misuse of cell phones launching a phone with a Barbie theme.
by the kids themselves or others and those who consider While equipping 8 to 12 year olds with cell phones
a kid cell phone as an unnecessary investment especially makes it easier for parents and children to get a hold
considering the fact that kids are usually under some of each other and coordinate activities, parents have
supervision or the other, not to mention their tendency other issues to grapple with. Many schools do not
to lose personal belongings. allow students to bring cell phones to classrooms.
Cell phone makers are following the trend set by According to one University of Chicago child psychia-
other industries such as food companies and retail- trist, most 8 to 12 year olds do not need a cell phone.
ers in targeting the preteen market. Firefly launched So the challenge for Firefly and their competitors is “At
its phones in February 2005 priced at $199 offering what age do kids really need a phone?” and “Is the pre-
12 months or 1,200 minutes of phone service—whichever teen market really worth going after?”

Questions for Discussion

1. Do you think preteens offer good market potential Source: Adapted with permission from Mike
for cell phone companies? Hughlett, “Target: Teens—Cell Phone Company
2. While designing products for this market, what are Going After the Preteen Market,” Chicago Tribune,
the issues faced by the service providers? April 12, 2005.

CASE 1-2 approach is Best Buy’s chief executive officer, Brad

Best Buy on a Segmentation Spree Anderson. While most chains use their marketing
budgets primarily to maximize customer traffic in the
With $24.5 billion in 2005 sales, Best Buy Co. is the view that more visitors will lift revenue and profit,
nation’s largest seller of consumer electronics. Its spa- Best Buy uses it to shun its unwanted customers. This
cious store and large inventory has helped it to increase would mean dumping nearly 100 million of their
market share, even as its rivals such as Circuit City unprofitable customers. A variation of this approach
Stores Inc. and Sears, Roebuck & Co., have struggled. is being used in the financial-services industry,
In fiscal 2004 that ended in February, Best Buy reported wherein attention is lavished on the best customers
net income of $570 million. Though up from $99 million and the unprofitable customers are penalized with
during the 2003 fiscal period, it was still below the fees for using ATMs or tellers or for obtaining bank
$705 million it earned in fiscal 2002. records.
Best Buy estimates that nearly 20 percent of its From Best Buy’s 1.5 million daily customers, Mr.
500 million visitors each year are undesirable and Anderson wants to separate the “angels” from the
wants to get rid of these customers. Behind this “devils.” Angels are customers who boost profits by
1
snapping up high-definition televisions, portable elec- customers who return items with the intention of
tronics, and newly released DVDs without waiting for repurchasing them at an “open box” discount, they are
markdowns or rebates. The devils are Best Buy’s worst experimenting with reselling them over the Internet, so
customers. They buy products, apply for rebates, that the goods do not reappear in the stores where they
return the purchases, and then buy them back at were originally purchased. In July 2004, they cut ties
returned-merchandise discounts. They load up on with fatwallet.com, an online affiliate that collected
“loss leaders,” then flip the goods at a profit on eBay, referral fees for delivering customers to Best Buy’s
slap down rock-bottom price quotes from websites and website, for revealing information about Best Buy’s
demand that Best Buy make good on its lowest-price planned Thanksgiving Weekend sale.
pledge. At dozens of websites like fatwallet.com, slick- Training of store clerks plays a vital role in iden-
deals.net, and techbargains.com, the devil customers tifying desirable customers by concentrating on their
trade electronic coupons and tips from former clerks shopping preferences and behavior. Staffers use quick
and insiders, hoping to gain extra advantages against interviews to identify profitable customers. For
the stores. instance, if a customer says his family has a regular
Best Buy has rolled out its angel–devil strategy in “movie night,” he is a prime candidate for home-theater
about 100 of its 670 stores. It is examining sales equipment. Likewise, shoppers with large families are
records and demographic data and devouring data- shown larger appliances and time-saving products.
bases to identify good and bad customers. To lure the The company attempts to entice the Barrys and Jills by
high-spenders, it is stocking more merchandise and providing services like a “personal shopper,” to locate
more appealing service options. To keep the undesir- unusual items, alert them on preferred items, and coor-
ables away, the company is cutting back on promotions dinate service calls.
and sales tactics that tend to draw them. However, the Best Buy’s Westminster, California, store is one of
risk attached to such an exercise is significant. The 100 using this technique. It targets upper-income men
pilot stores have proved more costly to operate and with a wide range of pricey home-theater systems and
since different pilot stores target different types of small-business owners with network servers and office
customers, they threaten the company’s economies PC solutions. During DVD releases, the store clerks
of scale. identify promising customers and guide them into a
After a series of analyses, Best Buy concluded that back room that displays $12,000 high-definition home-
most of its business came from five distinct customer theater systems. The room has easy chairs, a leather
groups: upper-income men, also referred internally as couch, and a basket of popcorn to simulate a theater
“Barrys”—who tend to be enthusiasts of action movies atmosphere. At stores popular with Buzzes, Best Buy is
and cameras, “Jills”—who are suburban mothers; busy setting up video game sections furnished with leather
but usually willing to talk about helping their families, chairs and players hooked to giant plasma-screen tele-
small-business owners, “Buzzes”—technology enthusi- visions. Mr. Anderson says early results indicate pilot
asts, also known as early adopters and interested in stores performed far better than conventional stores,
buying and showing off the latest gadgets. Mr. Anderson following which the company began converting
decided that each store should study the demograph- another 70 stores.
ics of the local market and realign themselves by Best Buy intends to customize the rest of its stores
stocking merchandise accordingly. Armed with this over the next three years. With customization of stores,
information, Best Buy began working on ways to avoid stock maintenance becomes crucial as it could topple
unprofitable customers. They just could not bar them the sales and customer goodwill. Periodic design
from entering their stores. But in summer 2004, they changes and customizations cause the costs to go up,
took steps to put an end to one of the biggest problems. but Mr. Anderson says that as stores share the success-
They enforced a restocking fee of 15 percent of the pur- ful ideas for acquiring customers, the average cost per
chase price on returned merchandise. To discourage store should fall.

Questions for Discussion

1. What benefits can Best Buy hope to gain from its Source: Adapted with permission from
customer segmentation tactics? Gary McWilliams, “Analyzing Customers,
2. Do you think Best Buy is making adequate use of Best Buy Decides Not All Are Welcome,”
marketing intelligence practices for its business The Wall Street Journal, November 8, 2004, p. A.1.
decisions?

2
CASE 1-3 What action would you take?
Ethical Dilemmas in Marketing 4. A well-respected public figure is going to face trial
Research1 on a charge of failing to report his part ownership of
certain regulated companies while serving as a
The following scenarios present a set of ethical dilem- Canadian provincial minister. The defense lawyers
mas that might arise in marketing research. Your have asked you, as a market research specialist, to
assignment is to decide what action to take in each do a research study to determine the characteristics
instance. You should be prepared to justify your deci- of people most likely to sympathize with the defen-
sion. Bear in mind that there are no uniquely right dant and hence to vote for acquittal. The defense
answers: Reasonable people may choose different lawyers have read newspaper accounts of how this
courses of action. approach has been used in a number of instances.
What action would you take?
1. You are the market research director of a phar- 5. You are the market research director for a large
maceutical company, and the executive director chemical company. Recent research indicates that
suggests to you that company interviewers tele- many of your company’s customers are misusing
phone physicians under the name of a fictitious one of its principal products. There is no danger
market research agency. The purpose of the resulting from this misuse, though customers are
survey is to help assess the perceived quality wasting money by using too much of the product
of the company’s products, and it is felt that the at one time. You are shown the new advertising
suggested procedure will result in more objective campaign by the advertising agency. The ads not
responses. only ignore this problem of misuse, they actually
What action would you take? seem to encourage it.
2. You are employed by a marketing research firm What action would you take?
and have conducted an attitude study for a client. 6. You show up your first day for a summer intern-
Your findings indicate that the product’s market- ship to meet your supervisor and get your first
ing efforts are not effective. This finding is badly assignment. She gives you a questionnaire with
received by the client’s product management team. specific marketing planning questions and tells
They request that you omit that data from your you that she would like you to contact the
formal report, which you know will be widely dis- company’s main three competitors and tell them
tributed, on the grounds that the oral presentation you are a student doing a study on the industry
was adequate for their needs. and get the answers to the questions. She says
What do you do? you should not tell them you are working for the
3. You are a study director for a research company company over the summer and adds “there is
undertaking a project for a regular client of your nothing wrong with not telling them—omitting
company. A study you are working on is about to the fact is not really lying.” You ask her what you
go into the field when the questionnaire you sent should do if they ask, and she says ‘just
to the client for final approval comes back drasti- tell them you are a student working on a paper
cally modified. The client has rewritten it, intro- and you don’t want to get a poor grade on the
ducing leading questions and biased scales. An assignment.”
accompanying letter indicates that the question- What action would you take?
naire must be sent out as revised. You do not
believe that valid information can be gathered
using the revised instrument.

1
These vignettes were provided through the courtesy of Professor Charles Weinberg, University of British Columbia, and are reproduced with his
permission.

3
CHAPTER 3—CASE

CASE 3-1 Much of what the Bestway Stores’ management

A VideOcart Test for Bestway knew about the VideOcart came from a press confer-
ence. They learned that IRI would beam a commercial
Stores via satellite to a pick-up dish at each store. The signal
would be sent out by a low-power FM transmitter to
The executives of Bestway Stores were intrigued with
each cart, and stored in the memory of a computer
a proposal they had received from Information
located in the handlebar of the cart.
Resources, Inc., the developer of the VideOcart, to par-
According to an IRI spokesperson,
ticipate in a market test of the new point-of-sale tech-
nology. They were debating whether to agree to let IRI The ads will be shown at breaks in an information and
conduct a test in 3 of their 300 stores. Their reasons for entertainment program for consumers and won’t inter-
doing it were not because they especially wanted to rupt the program. The sequence of the ads shown will
help IRI, but rather to learn about the benefits and be determined by the route of the cart through the store.
shortcomings of this approach to in-store displays as a As a shopper pushes a VideOcart down the aisles,
possible competitive weapon. As an input to the deci- the manufacturer’s ads for brands on the shelves being
sion, the marketing research department was asked to passed at that moment will be “triggered” at a rate of
design a study that would assess the desirability of about two per aisle (about 32 per store) and appear on
deploying the new display technology in all their stores the flat, 6-in. by 8-in. liquid-crystal display mounted
once the test was finished. The test was to last about on the handles of the cart. Tie-in promotion ads also
12 months. will be able to be used—for instance, a hotdog bun ad
when the cart is near the hot dogs.
How Does a VideOcart Work? Only about 15 percent of VideOcart’s display
Here is what a consumer would find: time will be devoted to ads. The rest will be a
friendly medium in which to display ads, including
After a long day at work, you rush to the super- a continually changing video newsmagazine, news
market to pick up dinner. As you wheel a grocery to create a new shopping experience, store specials
cart down the aisle, an ad for Brand X coffee flashes and maps, trivia questions, and videogames to play
on a liquid-crystal screen perched on your cart’s han- while waiting to check out.
dlebar. The ad reminds you that you need coffee, so The video seen on the screen isn’t television but
you drop a can of Brand X into your cart and push will use attention-getting graphics created on a per-
on to the next aisle. sonal computer.

BOB’S SUPERMARKET

Checkout
transmitter

Message

Store
transmitter

Manager's PC

4
The Test of the VideOcart the supermarkets, but we’re out to make that other
Besides gathering sales data, the test markets will be type of shopping cart ad irrelevant.
used to perfect consumer programming and fine-tune The VideOcarts will be designed to be weather-
the technology. IRI also will be checking on factors such proof and childproof. The retailers will have to
as the ideal length of ads, shopper interest in games and recharge the batteries on the carts each night.
information, how the shopper interacts with the unit, The carts should be equipped for under $500 per
and opportunities for the grocers to contribute pro- cart. The average supermarket has about 100 carts
gramming. VideOcart’s computer capabilities also will and IRI would turn about 75 of them into VideO-
offer supermarkets some advantages, including sound- carts, which we expect shoppers will seek out because
ing an alarm if a cart is taken too far from the store, as they’ll make shopping efficient and fun.
in an attempt to steal it. The stores also could use VideOcart will offer excellent media efficiency
VideOcart to transmit information such as the shortest compared to other alternatives. Once national, the
checkout line, the next number up at the deli counter, medium will reach 60 percent of all shoppers in a
or that a red Ford in the parking lot has its lights on. week at the cost per thousand of a free-standing
We will put the needed equipment into the newspaper insert—$4–$5 per thousand households.
supermarkets—including a satellite dish on the VideOcart ads will be able to be created in a few
roof—at no cost to the retailers and eventually will hours and somewhat inexpensively using microcom-
pay the supermarkets a royalty four to six times puter graphics software. The learning curve to mas-
greater than they’re now receiving from other shop- ter the technology should be short and IRI will pro-
ping cart ads. We’re not asking for an exclusive in vide technical support and counsel.

The Assignment

The marketing research manager pondered about this short, for management needed to know how the
project and wondered what really had to be learned to research manager was going to get usable information.
draw up a statement of purpose. With this in hand the If it looked too difficult or expensive, they might not
design of the research would be a lot easier. Time was agree to a test in their stores.

CASE 3-2 year, the company was incorporated as H. Drew Sperry

Sperry/MacLennan Architects and Associates; by then Sperry had added three junior
architects, a draftsman, and a secretary. One of those
and Planners architects was John MacLennan, who would later
become a senior partner in Sperry/MacLennan.
In August 1988 Mitch Brooks, a junior partner and
Throughout the 1970s, the practice grew rapidly
director of Sperry/MacLennan (S/M), a Dartmouth,
as the local economy expanded, even though the market
Nova Scotia, architectural practice specializing in recre-
for architectural services was competitive. With
ational facilities, is in the process of developing a plan to
the baby-boom generation entering the housing market,
export his company’s services. He intends to present the
more than enough business came its way to enable
plan to the other directors at their meeting the first week
Sperry to develop a thriving architectural practice,
of October. The regional market for architectural services
and by 1979 the company had grown to 15 employees
is showing some signs of slowing, and S/M realizes that
and had established branch offices in Charlottetown and
it must seek new markets. As Sheila Sperry, the office
Fredericton. These branch offices had been established to
manager and one of the directors, said at their last
provide a local market presence and meet licensing
meeting, “You have to go wider than your own backyard.
requirements during this aggressive growth period.
After all, you can only build so many pools in your own
But the growth could not last. The early 1980s was
backyard.”
not an easy time for the industry, and many architec-
tural firms found themselves unable to stay in business
About the Company through a very slow period in 1981–1982. The company
Drew Sperry, one of the two senior partners in laid off all but the three remaining partners: Drew,
Sperry/MacLennan, founded the company in 1972 as a Sheila Sperry, and John MacLennan. However, one
one-man architectural practice. At the end of its first draftsman and the secretary refused to leave, working

5
without pay for several months in the belief that the slowdown in late 1988, and economists are predicting a
company would win a design competition for an aquat- recession for 1989. With 19 employees to keep busy and
ics center in Saint John; their faith in the firm is still a competitor on the West Coast, they decided this morn-
appreciated today. ing that it is time to consider exporting their hard-won
Their persistence and faith was rewarded in 1983. expertise.
Sperry won the competition for the aquatics facility for
the Canada Games to be held in Saint John. Sperry had
gained national recognition for its sports facility exper- The Architecture Industry
tise, and its reputation as a good design firm specializ- Architects are licensed provincially, and these licenses
ing in sports facilities was secured. are not readily transferable from province to province.
From the beginning, the company found recre- Various levels of reciprocity are in existence. For this
ational facilities work to be fun and exciting. To quote reason, joint ventures are not that uncommon in the
Sheila Sperry, this type of client “wants you to be inno- business. In order to cross provincial boundaries, archi-
vative and new. It’s a dream for an architect because it tecture firms in one province often enter into a joint
gives him an opportunity to use all the shapes and col- venture arrangement with a local company.
ors and natural light. It’s a very exciting medium to It is imperative that the architect convince the
work in.” So they decided to focus their promotional client that he or she has the necessary experience and
efforts to get more of this type of work and consolidate capability to undertake the project and to complete it
their “pool designer” image by associating with Creative satisfactorily. S/M has found with its large projects that
Aquatics on an exclusive basis in 1984. Creative Aquat- the amount of time spent meeting with the client
ics provided aquatics programming and technical oper- requires some local presence, although the design need
ations expertise (materials, systems, water treatment, not be done locally.
safety, and so on) to complement the design and plan- Architects get business in a number of ways.
ning skills at Sperry. “Walk-in” business is negligible, and most of S/M’s
The construction industry rebounded in 1984; contracts are the result of one of the following five
declining interest rates ushered in a mini-building processes:
boom, which kept everyone busy for the 1984–1987
1. A satisfied client gives a referral.
period. Mitch Brooks joined the practice in 1987. The
2. A juried design competition is announced. (S/M
decision to add Brooks as a partner, albeit a junior one,
has found that these prestigious jobs, even though
stemmed from their compatibility. Brooks was a good
they offer “runners up” partial compensation, are
production architect, and work under his supervision
not worth entering except to win, since costs are
came in on budget and on time, a factor compatible
too high and the compensation offered other
with the Sperry/MacLennan emphasis on customer
entrants too low. Second place is the same as last
service. The company’s fee revenue amounted to
place. The Dartmouth Sportsplex and the Saint
approximately $1.2 million in the 1987 fiscal year; how-
John Aquatic Center were both design competition
ever, salaries are a major business expense, and profits
wins.)
after taxes (but before employee bonuses) accounted
3. A client publishes a “Call for Proposals” or a “Call
for only 4.5 percent of revenue.
for Expressions of Interest” as the start of a formal
Now it is late August, and with the weather cooling,
selection process. (S/M rates these opportunities;
Mitch Brooks reflects on his newest task, planning for the
unless it has a 75 percent chance of winning the
coming winter’s activities. The company’s reputation in
contract, it views the effort as not worth the risk.)
the Canadian sports facility market is secure. The com-
4. A potential client invites a limited number of archi-
pany has completed or has in construction five sports
tectural firms to submit their qualifications as the
complexes in the Maritime Provinces and five in Ontario,
start of a formal selection process. (S/M has a pre-
and three more facilities are in design. The awards have
pared qualification package that it can customize
followed, and just this morning, Drew was notified of
for a particular client.)
their latest achievement—the company has won the
5. S/M hears of a potential building and contacts the
$10,000 Canadian Architect Grand Award for the Grand
client, presenting its qualifications.
River Aquatics and Community Center near Kitchener,
Ontario. This award is a particularly prestigious one The fourth and fifth processes are the most com-
because it is given by fellow architects in recognition of mon in buildings done for institutions and large cor-
design excellence. Last week Sheila Sperry received word porations. Since the primary buyers of sports facilities
that the Amherst, N.S., YM-YWCA won the American tend to be municipalities or educational institutions,
National Swimming Pool and Spa Gold Medal for pool these are the ways S/M acquires a substantial share of
design against French and Mexican finalists, giving them its work. Although juried competitions are not that
international recognition. Mitch Brooks is looking common, the publicity possible from success in landing
forward to his task. The partners anticipate a slight this work is important to S/M. The company has found

6
that its success in securing a contract is often depen- in the process of applying to the Atlantic Canada
dent on the client’s criteria and the current state of the Opportunities Agency for financial assistance in
local market, with no particular pattern evident for a switching over to CADD.
specific building type. Under free trade, architects will be able to engage
After the architect signs the contract, there will be freely in trade in services. Architects will be able to travel
a number of meetings with the client as the concept to the United States and set up an architectural practice
evolves and the drawings and specifications develop. without having to become qualified under the American
Therefore, continuing client contact is as much a part Institute of Architects; as long as they are members
of the service sold as the drawings, specifications, and of their respective provincial associations and have
site supervision and, in fact, may be the key factor in passed provincial licensing exams and apprenticeship
repeat business. requirements, they will be able to travel and work in the
Developers in Nova Scotia often are not loyal buy- United States and import staff as required.
ers, changing architects with every major project or
two. Despite this, architects are inclined to think the
Where to Start?
buyer’s loyalty is greater than it really is. Therefore,
At a meeting in Halifax in January 1988, the Department
S/M scrutinizes buyers carefully, interested in those
of External Affairs had indicated that trade to the United
that can pay for a premium product. S/M’s philosophy
States in architectural services was going to be one posi-
is to provide “quality products with quality service for
tive benefit of the Free Trade Agreement to come into
quality clients,” and thus produce facilities that will
force in January 1989. As a response, S/M has targeted
reflect well on the company.
New England for its expansion, because of its geographic
The Opportunity proximity to S/M’s homebase in the Halifax/Dartmouth
In 1987, a report entitled “Precision, Planning, and area and also because of its population density and sim-
Perseverance: Exporting Architectural Services to the ilar climatic conditions. However, with all the hype about
United States” identified eight market niches for free trade and the current focus on the United States,
Canadian architects in the United States, one of which Brooks is quite concerned that the company might be
was educational facilities, in particular post-secondary overlooking some other very lucrative markets for his
institutions. This niche, identified by Brooks as most company’s expertise. As part of his October presentation
likely to match S/M’s capabilities, is controlled by state to the board, he wants to identify and evaluate other
governments and private organizations. Universities are possible markets for S/M’s services. Other parts of the
known not to be particularly loyal to local firms and so United States, or the affluent countries of Europe, where
present a potential market to be developed. The study recreational facilities are regularly patronized and design
reported that “post-secondary institutions require design is taken seriously, might provide a better export market,
and management competence, whatever the source” given S/M’s string of design successes at home and
(p. 39). Athletic facilities were identified as a possible the international recognition afforded by the Amherst
niche for architects with mixed-use-facility experience. facility design award. Brooks feels that designing two
Finally, the study concluded that “there is an enormous sports facilities a year in a new market would be an
backlog of capital maintenance and new building require- acceptable goal.
ments facing most higher education institutions” (p. 38). In his search for leads, Brooks notes that the APPA
In addition to the above factors, the study indi- (Association of Physical Plant Administrators of Univer-
cated others that Brooks felt were important: sities and Colleges) charges $575 for a membership,
which provides access to its membership list once a year.
1. The United States has 30 percent fewer architec- But this is only one source of leads. And of course there
tural firms per capita than Canada. is the U.S. Department of Commerce, Bureau of the
2. The market shares many Canadian values and Census, as another source of information for him to tap.
work practices. He wonders what other sources are possible.
3. The population shift away from the Northeast to S/M appears to have a very good opportunity in the
the Sunbelt is beginning to reverse. New England market because of all its small universities
4. Americans are demanding better buildings. and colleges. After a decade of cutbacks on spending,
corporate donations and alumni support for U.S. univer-
Although Brooks knows that Canadian firms sities has never been so strong, and many campuses have
have always had a good reputation internationally for sports facilities that are outdated and have been poorly
the quality of their buildings, he is concerned that maintained. But Mitch Brooks is not sure that the New
American firms are well ahead of Canadian ones in England market is the best. After all, a seminar on export-
their use of CADD (computer-assisted design and ing that he attended last week indicated that the most
drafting) for everything from conceptual design to geographically close market, or even the most psychically
facility management. S/M, in spite of best intentions, close one, may not be the best choice for long-run profit
has been unable to get CADD off the ground, but is maximization and/or market share.
7
Questions for Discussion

1. What types of information will Brooks need to col- 3. Assuming that S/M decides on the New England
lect before he can even begin to assess the New market, what information will be needed to imple-
England market? Develop a series of questions you ment an entry strategy?
feel are critical to this assessment.
2. What selection criteria do you believe will be rele- Source: This case was adapted with permission
vant to the assessment of any alternative markets? from a case prepared by Dr. Mary R. Brooks,
What preliminary market parameters are relevant of Dalhousie University.
to the evaluation of S/M’s global options?

CASE 3-3 merchants would be allowed in Turkey for the first

Philip Morris Enters Turkey time since the days of the sultans.
But there was a catch: Tekel would continue
Under regulatory and legal fire in the United States, to price and distribute all cigarettes both foreign
tobacco companies have been staking their financial and domestic. That advantage came in especially
futures in developing countries. In the seven years handy when Tekel in 1988 launched Tekel 2000,
since Turkey abolished price controls that had propped a cigarette blended with American tobacco leaves that
up its state-owned tobacco company, Philip Morris has it designed to compete with Marlboro. Priced about
gotten millions of Turks to cast aside local cigarettes in 25 cents lower than a standard 20-cigarette pack
favor of its Marlboro, Parliament, and L&M brands. of Marlboros at the time, Tekel 2000 quickly won a
For Philip Morris—which saw international tobacco quarter of the market.
profits grow 60 percent to $4.6 billion last year from Arguing that it couldn’t survive in Turkey unless
1994—nowhere has that push been more successful it had the right to price and distribute its own prod-
than in Turkey. In the nation that inspired the phrase ucts, Philip Morris leveraged the one thing it had that
“smokes like a Turk,” 43 percent of the 62.9 million the government badly wanted: millions of dollars to
population smokes, according to government esti- invest in the country. And it wouldn’t invest that
mates, compared to 25 percent in the United States. money unless Tekel gave up control.
Meantime, cigarette consumption in Turkey has Tekel eventually relented, and in May 1991,
increased at an annual rate of about 4.76 percent since Philip Morris got the right to market, price, and dis-
1992, making this one of the fastest-growing markets tribute its own cigarettes, conditioned on a number of
in the world. Philip Morris has watched its share of factors, including building its own factory. Philip
the Turkish cigarette market mushroom, to 23 percent Morris announced a joint venture with Sabanci Holding
in 1997 from 15 percent in 1995, while Tekel, the Inc., a local company, and poured $100 million to
government-owned tobacco company, has seen its start construction of a factory in the southwestern city
hold drop to 70 percent from 82 percent over the same of Torballi. The factory opened in 1993; Philip Morris
period, according to figures provided by the Turkish eventually expanded it into a $230 million facility
government. Third-ranked R.J. Reynolds, with its capable of cranking out more than 28 billion ciga-
Winston and Camel brands, says its share has grown rettes annually.
to 7.3 percent from 2.9 percent. Supporting the idea that Philip Morris adjust its
Turkish smokers got their first taste of Philip cigarette blends is a confidential 1992 report, titled “PM’s
Morris brands in the 1970s, when smuggled, tax-free Global Strategy: Marlboro Product Technology,” con-
American cigarettes began flooding local bazaars. But ducted by researchers at rival B.A.T. Industries PLC’s
it wasn’t until the early 1980s that the company was Brown & Williamson unit. “When Marlboro has been
allowed to sell cigarettes in Turkey. Eager to raise introduced into a market there is no evidence that ini-
Turkey’s status in the West, then–Prime Minister Turgut tial offerings may be closer to that market’s traditional
Ozal decided to turn his rural country into a model of taste,” concludes the report that documents different
free enterprise. One of his targets: Tekel, the creaky Marlboro formulations in countries including Brazil,
state monopoly that has held exclusive rights to sell Britain, and Germany. “Over time PM will alter the
tobacco, salt, and liquor to Turks since the waning days product and introduce product technology more con-
of the Ottoman Empire. sistent with an overall Marlboro sensory character.”
How could Mr. Ozal prod Tekel into the modern Philip Morris says it doesn’t comment on specu-
age? He announced in 1984 that foreign tobacco lation by competitors. The company says it strives

8
“to ensure that Marlboros are as consistent as possible prices were cut. Although they still maintain Tekel 2000
worldwide,” but adds that some variation results from was a success, Tekel executives announced that they
local regulations that limit constituents like tar or want to sell the brand to a foreign competitor. Where
require the use of locally grown tobaccos. Beyond the Philip Morris really bested rivals is in marketing and
taste difference, Tekel couldn’t keep up when Marlboro’s distribution.

Questions for Discussion

1. Obtain information on the current consumption 3. Is it ethical for Philip Morris to overtly alter the
pattern of cigarettes in Turkey. How has this changed taste of its cigarettes over a period of time for its
in the last 10 years? What kind of research should own profit?
Philip Morris be doing to gain market share in
Source: This case was prepared by V. Kumar and
Turkey?
Rajkumar Venkatesan for the purpose of classroom
2. What kind of information should Philip Morris
discussion from “How Philip Morris Got Turkey
obtain to decide on a marketing and distribution
Hooked on Marlboro,” Wall Street Journal,
strategy in Turkey? How can Philip Morris obtain
September 1998.
this information?

CHAPTER 4—CASE

CASE 4-1 That may be, but ideas that have the potential to draw
Reynolds Tobacco’s business from competition and increase one company’s
share of the market are constantly being examined.
Slide-Box Cigarettes One such new idea was a brand that R.J. Reynolds
Tobacco Co. (RJR) had in test market. This new brand
There is a tendency for management to think of mar- was developed to capture Marlboro smokers with
keting research as an expense, perhaps a necessary imagery that was more sociable and had more appeal
expense, but an expense nevertheless. With corporate to both male and female adult smokers than Marlboro’s
attention being focused more and more on the bottom traditional solitary cowboy image. From a product
line, one question is often asked: “What is the impact standpoint, the new brand’s smoothness was empha-
of current or potential new activities on profit?” This sized in contrast to the rich flavor emphasized in
case focuses on how marketing research can aid in deci- Marlboro advertising. Marlboro’s conventional crush-
sion making and enhance the bottom line. proof box has always been a key feature of the brand.
To give you some basic understanding of the busi- Rather than offering the new brand in an identical
ness situation, the cigarette industry is very mature. packaging configuration, Reynolds Tobacco’s R&D
Many big opportunity areas for product differentiation department developed a slide-box, a unique configura-
have already been thoroughly explored and mined by tion that operated something like a matchbox. This fea-
the major manufacturers. There are different product ture was intended as yet another point of difference to
attributes, ranging from different flavors (menthol and attract Marlboro smokers to the new brand.
nonmenthol), to different “tar” levels (full flavor, Concept product test results of the new brand
light/low “tar,” ultralow “tar”), to different lengths (Table 4-3) in a conventional crush-proof box, versus the
(king size to 120 mm), and even different circumfer- slide-box, indicated that the slide-box would enhance
ences (superslims to wide circumference). Imagery is the new brand’s appeal among prospect smokers.
another means of differentiating products, so there are When Reynolds management saw these results,
upscale cigarettes, masculine cigarettes, feminine ciga- they said, “If this slide-box is better than the conven-
rettes, and so on. Finally, price is another important tional crush-proof box, we shouldn’t just limit it to a
dimension differentiating brands. Combining all these new brand that may or may not make it out of the test
methods of differentiating products results in literally market. To really capitalize on the apparent appeal of
hundreds of types of cigarettes available to smokers, the slide-box, we should put it on our established prod-
ranging from superslim, ultralow-tar 120s in a box to ucts.” The direction to put it on established brands is
traditional nonfilter 70-mm cigarettes. not as clear as it may sound at first blush. There were
With this in mind, you would think that there are several questions to be resolved: Which brands? Which
few new ideas under the sun for tobacco manufacturers. styles of which brands? Should the slide-box replace
9
 TABLE 4-3
Concept Product Test Results

Conventional
Crush-Proof Box Slide-Box

Positive purchase interest 56S 64

Intended frequent use 59S 68

As usual brand 20 24
Occasionally 39 44

Package increased
purchase interest 51S 73
Increased a lot 27 53
Increased a little 24 20

Overall positive taste rating 72S 80

S ⫽ Significant at 80% confidence level or greater.

any current conventional crush-proof box, or should it objective was to determine the degree of interest in this
be an additional offering? How would a slide-box new slide-box packaging among each of these brands’
launch fit in with other planned programs? How big an prospect smoker groups. In designing the study, they
announcement should this be? (All media forms? Point- knew that they needed to analyze the data by each
of-sale advertising only?) Should pack graphics be brand’s prospect group. So they designed the sample
redesigned to emphasize the change, or should they in two phases. First, a large random sample of adult
just be translated from existing graphics? How much vol- smokers was drawn. Then additional interviews were
ume would the slide-box generate and, therefore, how conducted to give them large enough bases of specific
much new equipment would need to be purchased? types of smokers. As a result, the sample for the study
Given the excitement over this proposition, tenta- consisted of 767 adult smokers, 600 of whom were
tive plans were made regarding which brands would selected randomly, and an additional 167 interviews to
use the slide-box, volume projections were calculated, fill out specific prospect group quotas.
and equipment was ordered. The long equipment lead Given the sample size and the fact that RJR wanted
time provided time to resolve some of the key representation across the country, the marketing research
questions surrounding the slide-box. The most critical department conducted personal interviews in 20 geo-
question was which brand or brands should use the graphically dispersed markets during June 1991. The
slide-box. The issue here was one of image compatibil- biggest challenge in designing this research was to eval-
ity, that is, whether the inherent image of the slide-box uate the image of the packaging itself without allowing
was compatible with the current or desired image of any influence of the image of any brand. Hence, they
the brand. Another critical question was what was its showed smokers a sample of the packaging without any
source of appeal. If it was indeed a better package, graphics. Further, since they wouldn’t be able to evalu-
what were specific benefits that could be advertised to ate people’s responses to the slide-box packaging in a
prospect smokers? vacuum, they also showed them prototypes of current
A good deal of what marketing researchers do is packaging, that is, conventional crush-proof box and soft
implement standardized methodologies to answer pack, also without any graphics. This provided bench-
recurring marketing questions: How does a product marks to help them interpret the results.
compare to competition? How effective is this new ad They agreed that there are two aspects of packaging
campaign? How appealing is this premium? The issues on which the packs should be evaluated: benefits of the
and questions surrounding the slide-box were new, so packaging itself (such as protecting the contents, being
the marketing research department developed a cus- easy to open or close, etc.), and the image of the types of
tom research design that they felt would generate smokers who would use such packaging (such as white-
required consumer input on the slide-box. collar versus blue-collar). They showed respondents pro-
The research was designed with two objectives. totypes of each of the three types of packaging attributes
The first objective was to determine which of RJR’s and user imagery. Importantly, each smoker interviewed
major established brands has an image consistent with was given a fresh prototype and allowed to open it. After
the image projected by the slide-box; and the second they had obtained this information, they then had each

10
 TABLE 4-4
Overall Evaluation of Packs

Slide-Box Conventional
Pack Crush-Proof Box Soft Pack
(%) (%) (%)

Favorable 60 70 42
Unfavorable 26 8 26

of the brands in their study rated on these same user It was also important that the user image of the
characteristics. slide-box was, with one exception, not felt by respon-
Finally, they asked the smokers in their study dents to be compatible with the user imagery of the
directly how appropriate the three types of packages brands for which the pack was being considered. The
were for the brands of cigarettes included in their study. analysis found that only one of the established brand’s
The order in which all packs and brands were presented prospect group was most likely to find the slide-box as
was rotated to avoid any order bias. The results of the appropriate for the brand as the conventional crush-proof
overall evaluation of packs are given in Table 4-4. box and to believe that brand’s smokers and slide-box
The outcomes of the perception studies are illus- users share many similar characteristics. Both groups
trated in Figures 4-4, 4-5, and 4-6. were pictured as white-collar, upper-class women seek-
The researchers found that the slide-box had func- ing changes and new experiences. The only inconsistency
tionality problems as compared to the conventional was that respondents perceived the slide-box user as
crush-proof box. It was seen as having cosmetic advan- European. Their image of the slide-box user was more
tages, such as being attractive, modern, being in its consistent with their image of their current brand than
own case, and having an edge over the conventional their image of the conventional crush-proof-box user.
crush-proof box. And, once opened, hard to keep The results of the appropriateness of packs of
closed. Thus, the cigarettes were more apt to fall out. cigarette brands are presented in Table 4-5.
The slide-box was also seen as less convenient to use. The new brand was not included in this national
And importantly, the slide-box was perceived to be study, as it was only in test market at this time.
more gimmicky than the conventional crush-proof box. However, the new brand’s prospect group did not rate
It is important to note that although these problems the slide-box as highly overall as they rated the con-
were pervasive, in that all target groups felt this way, ventional crush-proof box. Figure 4-7 provides the dif-
it was conceivable that these pack problems might go ferences in perception of slide-box-pack users among
away as smokers became more experienced with using the new-brand smokers.
this configuration.

Perceptions of slide-box-pack users

Contemporary 57%
Old-fashioned 6%
Seeks change 56%
Resists change 7%
Seeks new experiences 51%
Prefers familiar 6%
Upper-class 36%
Lower-class 5%
White-collar 34%
Blue-collar 6%
Leader 31%
Follower 10%
Balances work & play 23%
Work comes first 8%

FIGURE 4-4
Perceptions of slide-box-pack users.

11
 Perceptions of slide-box vs.
conventional crush-proof-box users
30%
Male
11%

Contemporary 27%
57%
23%
Frequent smoker
11%
Balances work Conventional crush-proof box
22%
and play 23% Slide-box

FIGURE 4-5
Perceptions of slide-box versus conventional crush-proof-box users.

Perceptions of slide-box vs. soft-pack users

36%
Frequent smoker
11%
34%
Old-fashioned
8%
29%
Prefers familiar
6%
28%
Resists change
7%
34%
Older
12%
Soft pack
22%
Blue collar Slide-box
6%

FIGURE 4-6
Perceptions of slide-box versus soft-pack users.

TABLE 4-5
Appropriateness of Packs of Cigarette Brands

Percent Saying Extremely/Very Appropriate

Most
Established Established Established Established Often
Brand A Brand B Brand C Brand D Brand

Slide-box 32 47 49 39 48
Conventional
crush-proof box 55 64 51 62 73
Soft pack 61 44 39 55 44

12
 Perceptions of slide-box-pack users
(Among Dakota smokers)
Seeks change 59%
Resists change 7%
Contemporary 58%
Old-fashioned 8%
Seeks new experiences 57%
Prefers familiar 5%
Upper-class 36%
Lower-class 7%
White-collar 35%
Blue-collar 7%
Balances work & play 23%
Work comes first 8%

FIGURE 4-7
Perceptions of slide-box-pack users (among new brand smokers).

Questions for Discussion

1. Why are the results of the second study different Source: This case was adapted with permission from
from the first? a case originally written by H. Daniel Murphy and
2. Based on these findings, what is your recommen- Mary E. Brownell, “How Research Can Save Your
dation to the company? Company Time and Money!: A Case Study,” The
Council of American Survey Research Organizations
Annual Journal, 1992, pp. 107–112.

CASE 4-2 and CFC handled all processing and marketing of the
California Foods Corporation products. CFC’s sales had increased every year since
the takeover by the federation. CFC was generally
In early 1990, the international marketing manager at considered the foremost leader in the juice industry. It
California Foods Corporation (CFC), Lois Verbrugge, set the standards for progressive marketing techniques
was considering how to react to the continuing decline and new product development for the industry. With
of CFC grape juice sales in the Puerto Rican market. In sales reaching a quarter billion dollars in 1989, the
1989, the marketing staff in the international division growers and CFC were the largest grape growing, pro-
estimated that sales of CFC grape juice had fallen off by cessing, and marketing enterprise in the world.
approximately 30 percent from the previous year. To Originally, CFC had produced only grape-related
determine why this loss of volume had taken place, products: grape jams, grape jelly, frozen grape concen-
extensive consumer research was utilized. But, as of trate, grape drink, and grape preserves. In recent years,
February, Ms. Verbrugge and her staff had not come up however, CFC had expanded to include nongrape
with any clear-cut remedies for CFC’s problems in the products, too. Between 1970 and 1982, CFC introduced
Puerto Rican market. 36 new products. In 1990, CFC incorporated a complete
line of fruit juices with a selection of fruit drinks and a
Company Background line of fruit-flavored preserves.
CFC was a wholly owned subsidiary of the Federation
of Grape Growers’ Associations. The federation pur- CFC’s International Division
chased the California Foods Corporation in 1956 as CFC distributed an assortment of products to foreign
part of a strategy to integrate its business forward into markets with the majority of sales derived from juices
the processing and distribution of grape products. CFC and fruit drinks. It marketed its products to over
continued in 1990 to operate as an agribusiness largely 40 countries. Major markets included Puerto Rico,
as it had in 1956. The federation supplied the grapes, Mexico, and Japan. CFC products were distributed
13
by food brokers and distributors to retail stores and Frozen concentrates represented another compet-
food service institutions. In 1988, the International Divi- ing group that was large and had shown strong growth
sion experienced record sales and greater than expected in the preceding three years. Again, the miscella-
profitability. Sales slipped slightly during 1989, largely neous/all-others subgroup had shown steady growth.
the result of sales erosion in the Puerto Rican market. Perhaps some of CFC grape juice’s loss could be attrib-
utable to a shift of sales across generic categories.
The Juice and Drinks Market in Puerto Rico
Most of the juice consumption in Puerto Rico was com- CFC’s Entry into Puerto Rico
posed of imported products. Some of the more popu- CFC’s first experience in Puerto Rico came in the 1950s
lar brands competing for market share were CFC, when it introduced CFC grape juice. At that point,
Seneca, Pueblo, and Grand Union. There was only one grape juice was practically unheard of by the majority
domestic grape juice producer, selling under the name of Puerto Ricans. Despite this, the introduction was a
Richy. Richy had been in business for a few years, but resounding success and CFC grape juice became the
its impact on the market had been minimal. Table 4-6 best-selling juice in Puerto Rico.
outlines the imported volumes of juices and drinks into Rumor had it that CFC grape juice’s success was
Puerto Rico over the last three years. traceable to the Puerto Rican beliefs that grape juice
As the table reveals, grape juice imports (California was good for men’s virility and for women’s hemoglo-
Foods’ and others) were declining rather sharply. Still, bin during their menstrual cycles. Pseudomedicinal
the grape juice market was by far the largest juice drinks were concocted by mixing eggs with grape juice.
market in Puerto Rico. The resulting mixture was referred to as an “egg
The “fruit drink” category was quite large too and punch.” To take advantage of this seemingly unique
was growing, especially the miscellaneous/all-others consumer behavior, CFC launched an “egg punch”
subgroup, which included Tang’s imported powdered campaign in 1985. One television spot showed a young
grape and orange drinks. Because many Puerto Ricans Puerto Rican man at a disco drinking an egg punch and
equated powdered grape with grape juice, it was pos- subsequently departing with an attractive young
sible that at least some of CFC grape juice’s volume loss woman. Print advertising featured a mother nursing
could be traceable to these imports, although no hard her newborn and copy expounding the nutritional
evidence existed. value of grape juice.

TABLE 4-6
Juices and Drinks Imported into Puerto Rico

Thousands of Cases Percent of

(not equivalents) Change

1987 1988 1989 1988–1989

Fruit juices
Vegetable juice 20.6 23.4 23.9 ⫹2.1
Tomato juice 45.5 21.2 26.3 ⫹24.6
Apple juice 84.5 109.0 105.6 ⫺3.1
Citrus juice 203.5 198.7 183.4 ⫺7.7
Nectars — 5.0 1.8 ⫺64.0
Pineapple juice 22.5 22.9 29.1 ⫹27.1
Prune juice 25.8 23.3 29.5 ⫹26.6
Grape juice CFC 569.1 586.5 412.1 ⫺29.7
Other 40.6 37.1 26.6 ⫺28.3

Fruit drinks
RJR 114.1 161.0 116.3 ⫺27.8
Bordena 92.9 124.4 132.6 ⫹6.6
Miscellaneous/all othersb 260.5 296.4 356.0 ⫹20.4

Fruit juice—frozen and concentrated

Citrus Central 184.8 236.6 219.5 ⫺7.2
CFC 34.4 24.4 32.5 ⫹33.2
Miscellaneous/all others 378.1 431.5 499.8 ⫹15.8
a
Includes Orange Burst instant breakfast drink, Wyler’s ades.
b
Includes Tang powdered grape and orange drinks.
Source: Maritime Reports, Washington, DC. U.S. Government Printing Office, 1990.

14
TABLE 4-7
Consumption Results of Sample of Puerto Rican Grape Juice Users
During 1988 and 1989

Previous Users Current CFC Users

n ⴝ 45)
(n n ⴝ 155)
(n

Juices More Same Less Don’t Use More Same Less Don’t Use

Orange 57.7% 28.9% 11.1% 2.3% 43.5% 42.2% 11.7% 2.6%

Grape 13.3 37.8 24.5 24.4 38.9 47.4 13.0 0.7
Pineapple 22.2 26.7 33.3 17.8 23.3 29.9 31.1 15.7
Grapefruit 15.6 11.1 51.2 22.1 5.2 16.9 45.4 32.5
Fruit drinks 17.7 20.0 35.5 26.8 13.6 29.2 23.3 33.9
Fruit nectar 20.0 35.6 26.7 17.7 13.6 30.5 30.5 25.4
Powdered drinks 31.1 17.8 24.4 26.7 9.1 32.5 34.4 24.0

Grape juice was indeed CFC’s biggest seller in Puerto Ricans perceived grape juice to be both tasty
Puerto Rico. Sales for 1989 were 412,000 cases. Frozen and nutritious. On the negative side, respondents who
concentrated grape juice accounted for sales of 32,000 were buying less grape juice had a variety of reasons
cases during 1989. Other CFC products were Calfood for not buying it; most notably, very high price and
fruit drink, California instant powdered grape drink, preference for other juices were mentioned.
CFC grape soda, and CFC strawberry soda. It was discovered that previous CFC users replaced
grape juice with three other types of beverages: other
Consumer Research canned juices (pineapple, orange, grapefruit), natural
In order to ascertain the causes of CFC’s rapid decline juices (orange, grapefruit, tamarind, lemon), and car-
in grape juice sales, an “Awareness, Usage, and Atti- bonated drinks (Pepsi, Coca-Cola, and the like).
tude Study” was compiled in February 1990 to update Researchers had asked the question “Why aren’t
the marketing department’s understanding of Puerto you using more CFC grape juice?” The most frequent
Rican grape juice consumers. Two hundred personal response indicated that CFC’s price was too high and
interviews were done with people who had used grape that the respondents tried to buy products that were
juice during the previous two years. The study was more economical. Secondary reasons suggested that
administered by a Puerto Rican consulting group. they did not like the taste and preferred other flavors
Results are listed in Table 4-7. to grape. Table 4-8 summarizes consumers’ reasons for
The results of the study showed that the demand buying either less or no grape juice in general and of
for orange juice had increased tremendously since 1988. CFC’s in particular.
Both current and previous study users of CFC grape CFC had performed a similar consumer study in
juice were drinking much more orange juice by 1990. 1985 to determine grape juice drinkers’ attitudes
In addition, the percentage of respondents who did not toward CFC grape juice. One section of the 1985 ques-
use orange juice was practically nil. tionnaire involved consumers’ opinions of the charac-
Current users of CFC juice continued to drink teristics of CFC grape juice. Likewise, part of the 1990
large quantities of grape juice, as the figures reveal. In survey was devoted to similar questioning. In both
fact, 86 percent of all CFC users said that they drank studies, respondents rated CFC grape juice on the basis
as much, or more, grape juice in 1989 as they had pre- of eight criteria, on a scale from 1 to 6. The figures in
viously. However, among the previous CFC users, Table 4-9 represent average ratings for each of the prod-
there were many more who had decreased their con- uct characteristics.
sumption of grape juice than had increased it. There- Both studies seemed to suggest that CFC grape
fore, it was implied that they were not switching from juice had been, and still was, well regarded in the
one grape juice brand to another, but drinking more Puerto Rican market. There had not been too much
orange juice instead. Over 57 percent of previous CFC change in the general opinion that CFC grape juice was
users drank more orange juice by 1990 than they had a good-tasting, nutritious, high-quality product. In con-
in early 1988. sumers’ minds even the price had become more rea-
The main motive for the purchase of grape juice by sonable in relation to the generally stormy economic
mothers in the sample was because their children had conditions. So what seems to be the problem with CFC
asked for and/or liked it. The study also revealed that grape juice in the Puerto Rican market?
15
 TABLE 4-8
Respondents’ Reasons for Not Buying Grape Juice

Reasons for No Reasons for No

Longer Serving Longer Serving
Grape Juice CFC Grape Juice

High price 22.6% 23.2%

Only use it occasionally 9.7 4.4
Prefer other flavors 29.0 22.2
Harmful to stomach/diet 12.9 10.3
Prefer natural juices 16.1 6.7
Not accustomed to using it n.a. 8.9
Prefer powdered drinks n.a. 8.7
Other 9.7 15.6
Total 100.0% 100.0%

TABLE 4-9
Averaged Ratings of CFC Grape Juice
(scale of 1 to 6)

n ⫽ 200)
1990 Study (n n ⫽ 200)
1985 Study (n

Sweetness 4.95 3.96

Taste 4.96 4.73
Economy 3.86 3.47
Nutrition 5.06 5.24
Naturalness 4.91 5.05
Best for children 4.97 4.92
Best for adults 4.88 4.74
Quality 5.13 5.17

The study data appear to support the notion that additional funds for marketing research. Before making
CFC grape juice is held in high esteem in Puerto Rico, any decision, however, she wanted Mr. Hartman’s
yet a solution to CFC’s sales problem is needed. With assessment of the situation.
this in mind, Ms. Verbrugge arranged a meeting with
Jeff Hartman, Market Research Manager, to discuss and Source: This case was reprinted with permission
review the situation. Ms. Verbrugge wanted to examine from Subash C. Jain, International Marketing
the problem in more detail and was prepared to commit Management, CA: Southwestern Publishing Co., 1993.

Cases for Part I

Nature and Scope of Marketing Research

CASE I-1 and other milk by-products—such as yogurt, cottage

Clover Valley Dairy Company cheese, butter, skim milk, buttermilk, and cream—in
Camden, New Jersey. The raw milk was obtained from
In the fall of 1978, Vince Roth, General Manager of the independent farmers in the vicinity of Camden and was
Clover Valley Dairy Company, was considering whether processed and packaged at the Clover Valley Dairy.
a newly developed multipack carrier for yogurt was ready Clover Valley’s sales had grown steadily from 1930
for market testing and, if so, how it should be tested. until 1973 to an annual level of $3.75 million. However,
Since 1930, the Clover Valley Dairy Company had between 1973 and 1977, a series of milk price wars cut
sold, under the trade name Valleyview, milk, ice cream, the company’s sales to $3.6 million by 1977. During this

16
time, a number of other independent dairies were cups were more than triple the unit sales of the old
forced to close. At the height of the price wars, milk 8-oz tubs (see Exhibit I-1). While the increased sales
prices fell to 75 cents per half-gallon. In the spring of volume was welcomed, the new plastic cups increased
1977, an investigation of the milk market in Camden unit packaging costs from 7.2 cents to 12.0 cents. This
was conducted by the Federal Trade Commission and more than offset the saving of 4 cents because of the
by Congress. Since then, prices had risen so that Clover reduction in the amount of yogurt per container. Retail
Valley had a profit for the year to date. prices were reduced from 41 cents to 34 cents for the
Clover Valley served approximately 130 grocery new 6-oz cup, while the price for the 1-lb tub remained
store accounts, which were primarily members of a co- at 75 cents. The increased sales then increased the total
operative buying group or belonged to a 10-store chain dollar contribution to fixed costs from yogurt by only
that operated in the immediate area. Clover Valley no 5 percent. (All dairies priced their yogurt to give retail-
longer had any major chain accounts, although in the ers a 10 percent margin on the retail selling price.
past they had sold to several. Because all three of the Competitor’s retail prices for their 8-oz tubs remained
major chains operating in the area had developed exclu- at 41 cents.)
sive supply arrangements with national or regional Mr. Roth felt that both the change to plastic and
dairies, Clover Valley was limited to a 30 percent share the convenience of the smaller size were responsible for
of the Camden area dairy product market. the increased sales. However, he was disappointed
Although Clover Valley had a permit to sell its with the high packaging costs and began to look at ways
products in Philadelphia, a market six times the size of of reducing them, without changing the package much
Camden, management decided not to enter that mar- further. He felt another package change would be too
ket and instead concentrated on strengthening their confusing to consumers. Because of the economies of
dealer relationships. In addition, it was felt that, if a price scale needed to produce plastic containers, costs could
war were to ensue, it might extend from Philadelphia be reduced if more units were produced and sold.
into the Camden area. Mr. Roth felt that packaging a number of cups together
With the healthier market and profit situation in would make the 6-oz cups easier to carry home, which
early 1978, Clover Valley began to look for ways to might increase sales, and would certainly reduce pack-
increase sales volume. One area that was attractive aging costs.
because of apparent rapid growth was yogurt. During By 1978, work had begun on developing a multi-
the previous three years, management had felt that this pack holder to hold six cups together. A single strip of
product could help to reverse Clover Valley’s down- aluminized plastic would serve both as holder and as
ward sales trend, if given the correct marketing effort. the top for two rows of three yogurt cups. A single cup
However, the financial problems caused by the loss of could be readily separated from the others in the pack.
the national grocery chains and the price war limited Dairy personnel constructed wooden models of several
the firm’s efforts. As a result, Mr. Roth felt that Clover different cups for use with the holder and with plastic-
Valley had suffered a loss of share of yogurt sales in the molding experts, choosing one that would mold easily
stores they served. and cheaply. Eventually, some of these carriers were
Since 1975, Mr. Roth had been experimenting with made to order for testing in the plant and among
Clover Valley’s yogurt packaging with the hope that a Clover Valley employee families.
new package would boost sales quickly. All dairies in Several problems soon became apparent. The
Clover Valley’s area packaged yogurt in either 8-oz or holder did not always fasten securely to all six cups in
1-lb tubs made of waxed heavy paper. Clover’s 8-oz tub the multipack. While the holder strip was being put on,
was about 5 in. high and 212 in. in top diameter, taper- the side walls of the cups were slightly compressed,
ing to 134 in. at base. causing some cups to crack at the edges. When con-
The first design change to be considered was the sumers tried to remove one of the cups, they sometimes
use of either aluminum or plastic lids on the traditional pulled the top from an adjacent cup. The problem was
yogurt tubs. However, these were rejected because the the strength of the aluminized plastic, which made it
increased costs did not seem to be justified by such a difficult to tear even when perforated.
modest change. Changing just the lid would not make The multipack was redesigned and again tested in
their tubs appear different from their competitor’s tubs, the plant and by employee families. It appeared that the
it was felt. new package was performing satisfactorily. Negotiations
By 1976, Mr. Roth had introduced a completely dif- with Clover Valley’s carton supplier resulted in an esti-
ferent package for Clover Valley’s yogurt. The 8-oz tubs mated price of 8.5 cents for the first 100,000 units. There-
were replaced by 6-oz cups, designed for individual after unit costs would drop to 7.5 cents per 6-oz cup.
servings. In addition, the new cups were made of plas- Mr. Roth decided that the best multipack carrier
tic and had aluminum foil lids. The 1-lb tubs were presently possible had been designed. His attention
unchanged. No special promotional effort was under- then turned to methods of testing the new packs for
taken by Clover Valley, but unit sales of the new 6-oz consumer acceptance. Mr. Krieger, his father-in-law

17
EXHIBIT I-1

Clover Valley Dairy Company: Sales Results

1974 1975 1976 1977 1978

Unit Sales of Yogurt—8-oz Tubs (6-oz after June 1977)

January 1,203 3,531 7,899 18,594

February 996 3,651 7,629 20,187
March 960 3,258 6,677 20,676
April 853 3,888 6,081 20,199
May 861 4,425 5,814 18,420
June 915 4,044 12,726a 14,424
July 978 3,546 13,422 16,716
August 1,254 3,696 15,105 16,716
September 1,212 3,561 23,601 18,657
October 1,740 1,485 4,731 23,214
November 1,437 2,928 4,499 22,146
December 1,347 3,528 6,177 17,916

Unit Sales of Yogurt—1-lb Tubs

January 3,882 3,715 3,937 3,725 2,971

February 4,015 3,596 3,833 3,510 3,232
March 4,061 3,670 3,285 3,344 2,866
April 3,573 3,405 3,333 3,503 3,392
May 3,310 3,482 3,609 3,101 2,390
June 3,252 3,376 3,366 3,537 2,094
July 3,383 3,366 2,837 3,827 2,589
August 3,721 3,307 2,616 3,103 2,384
September 3,415 3,275 2,729 2,871 2,895
October 3,276 3,450 2,816 3,028
November 3,865 4,650 3,375 2,796
December 4,110 3,908 3,386 3,086
a
6-oz tubs.

and president of Clover Valley, sent him the following 3. In the third week we’ll deliver both the packs and the
letter concerning market testing: single cups.
4. During the third weekend we’ll have someone make a
Dear Vince, survey at the store to determine its acceptance.
5. Here is how it could be conducted:
Concerning the market test of the new cups and carriers, I a. Station someone at the dairy case.
have a few suggestions that may be helpful, although the final b. After the shoppers have chosen either single cups
decision is yours. I think we should look for a few outlets or the multipacks, question them.
where we are not competing with the other dairies, perhaps c. If they chose the multipacks, ask them why.
the Naval Base or Bill’s Market. Actually, if we use Bill’s, d. If they chose the single cups ask them why they
then the test could be conducted as follows: didn’t buy the packs.
1. Give Bill a special deal on the multipacks for this week- e. Thank them for their help and time.
end.
Yours,
2. In the next two weeks, we’ll only deliver the multi-
CHARLES KRIEGER
packs and no single cups at all.
(signed)

Questions for Discussion

1. Should the new multipack carrier be tested? 3. How useful is the proposed test in addressing the
2. If a test is judged necessary, what should be the management problem? What changes, if any, would
criteria for success or failure? you recommend?
18
CHAPTER 5—CASE

om/ c o l
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CASE 5-1 areas were canned tomato products, frozen orange
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Barkley Foods juice, cake mixes, and yogurt. Barkley was known to
w

er
have strengths in operations (product preparation), dis-
w

Joyce Stevenson, the manager of marketing research for tribution (obtaining distribution and managing the
Barkley Foods, had just left an emergency meeting with shelves), and advertising. Their brands typically held a
the firm’s president. An opportunity to buy an estab- solid second-place position in the supermarket. There
lished line of gourmet (high-quality/high-priced) was no effort at umbrella brand identification, so each
frozen dinners had arisen. Because there were other product area was carried by its own brand.
interested buyers, a decision had to be made within Joyce Stevenson had previously been in strategic
three or four weeks. This decision depended on judg- planning, and reviewed the type of information and
ments about the future prospects of the gourmet frozen analysis that would be required to support a strategic deci-
dinner market and whether Barkley could achieve a sion like this one. She wrote down the following four sets
competitive advantage. The marketing research group of questions to guide the thinking of the research group:
was asked to provide as much useful information as
possible within a 10-day period. Although uncomfort- 1. Market analysis
able with the time pressure involved, Joyce was pleased ■ What are the size, current growth rate, and pro-
that marketing had finally been asked to participate in jected growth rate of the industry and its relevant
the analysis of acquisition prospects. She had pressed subsets (such as ethnic dinners) for the next five
for such participation and now she had to deliver. and ten years?
Because of prior work on frozen fruit juices, Joyce ■ What are the important industry trends?
had some knowledge of the gourmet frozen market. ■ What are the emerging production technologies?
It was pioneered by Stouffer, who introduced the ■ What are the distribution trends?
Lean Cuisine line of entrees in 1981. Since then, other ■ What are current and future success factors
firms have entered the industry with complete gourmet (a competitive skill or asset needed to compete
dinners (including Swanson’s Le Menu and Armour’s successfully)?
Dinner Classics). The distinction between entrees, 2. Environmental analysis
dinners, and the three main types of food offered— ■ What demographic, cultural, economic, or gov-
conventional, ethnic (i.e., Benihana Restaurant Classics), ernmental trends or events could create strategic
or low-calorie (i.e., Weight Watchers or Light & threats or opportunities?
Elegant)—define relevant submarkets. Joyce hypothe- ■ What major environmental scenarios (plausible
sized that the gourmet frozen food buyer differs from the stories about the future) can be conceived?
buyer of conventional “TV dinners” in several respects. 3. Customer analysis
The gourmet frozen food buyers are generally young, ■ What are the major segments?
upper-socioeconomic-group people who probably have ■ What are their motivations and unmet needs?
microwaves, are more health conscious, and are likely to 4. Competitor analysis
be working women and others who want sophisticated ■ Who are the existing and potential competitors?
cuisine but lack the time to prepare it. ■ What are their current or forecasted levels of
Barkley Foods was a diversified food company sales, market shares, and profits?
with sales of $2.3 billion. Over 80 percent of its sales ■ What are their strengths and weaknesses?
came from branded packaged food products sold ■ What strategies are they following, and how are
nationally through grocery stores. Its largest product they differentiating themselves in the market?

Questions for Discussion

1. What secondary data sources would be useful? What 3. What other mechanisms would you use to gather
types of questions might be answered by each? information?
2. Identify one piece of information from the library
that would be helpful and relevant. How did you
locate it?
19
 om/ c o l
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CASE 5-2 managers are rewarded for seeing their divisions split
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le
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Dell in Latin America? into smaller units and their responsibilities cut back.
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er
Incidentally, Dell Computer Corp. is expected to
w

Dell, which thrived while other PC makers stumbled in announce a major foray into Brazil, in a bid to boost its
1998, reported a 53 percent jump in profit and a 50 per- share of Latin America’s fast-growing personal-
cent jump in revenue for its fiscal second quarter, which computer market. Foreign companies with local pro-
ended in July 1998. Unlike most of its rivals, Dell deals duction plants dominate Latin America’s estimated
directly with customers and builds PCs only after $6.5 billion personal-computer market. Compaq Com-
receiving an order. However, all is not well for Dell. puter Corp., International Business Machines Corp.,
While Dell continues to blow away the competition and Acer Inc., and Hewlett-Packard Co. together accounted
Wall Street with enormous increases in personal- for 42 percent of desktop and notebook sales in 1997,
computer sales, it is continually scrambling to bring in according to IDC Latin America, a market-research
and train enough people to keep up with its orders. firm. Dell ranked ninth with 1.2 percent of the market.
The company’s employment had grown 56 percent At the company’s annual meeting in July 1998, Vice
in 1997, to 20,800, and within a span of three months Chairman Morton Topfer said Dell aimed to open a
Dell added 225 people a week—about the same it plant in Latin America in 1999 and noted that Latin
added every six weeks in 1996. To manage this America is key to its international expansion. The com-
expansion Dell has aggressively recruited experienced pany already operates regional production plants in
outsiders and tried to standardize training of new Malaysia, Ireland, the United States, and China.
employees. It has also created a culture where

Questions for Discussion

1. What are the issues concerning the Latin American Source: This case was prepared by V. Kumar and
market that Dell should address before it enters Rajkumar Venkatesan for the purpose of
into Brazil? classroom discussion from “Dell to Build Plant to
2. What kind of information is needed to address the Boost Latin Presence,” Wall Street Journal,
issues identified in question 1? What are the pos- August 18, 1998, and “Dell Scrambles to Find Enough
sible sources of the required information? Workers to Fuel Growth,” Wall Street Journal,
3. What are your recommendations to Dell regarding August 20, 1998.
the steps for expanding its operations in Latin
America?

CASE 5-3 designed to meet a wide range of their apparel and

Eddie Bauer: Strategize with home-furnishing needs. Since 1920, the company has
evolved from a single store in Seattle to a multichan-
Secondary Marketing Data nel, international company with more than 590 stores
Eddie Bauer, Inc., is a leading international retail brand, worldwide. In addition, Eddie Bauer has 110 million
offering casual lifestyle products for adults through its catalogs in circulation and an online website
retailing concepts: Eddie Bauer and Eddie Bauer Home. (www.eddiebauer.com). The company operates stores
Eddie Bauer products are for men and women who seek in the United States and Canada, and has joint venture
versatile, classically styled, high-quality merchandise partnerships in Germany and Japan.

20
 Eddie Bauer has long considered the location of So Eddie Bauer purchased Clarita’s online geocod-
stores as the key element for maximizing sales. How- ing and GIS mapping software, along with databases
ever, the problem has been how to choose these prime to provide precise knowledge for identifying ideal loca-
locations. Until recently, the company relied on basic tion. The first step was to identify potential areas of
census information, such as income and number of high retail expenditures. Information (household
households, when choosing locations for new stores. growth rate, number of housing units) about these loca-
But recent demographic changes in the United States tions along with consumer information (age, income
and Canada have made this task more complex. level, household size, and education level) were col-
One of the main objectives of Eddie Bauer’s mar- lected using Clarita’s demographics. Thus, for each
keting team was to answer the following questions: proposed store location, Eddie Bauer’s marketing team
gathered detailed consumer information on the market
■ Who are our best prospects? What are their demo- and potential new locations relative to existing stores
graphics: age, income, occupation, education, house- and competitors.
hold size, and more? Moreover, Eddie Bauer’s marketing team started to
■ What are they like? How would target customers like use Clarita’s Potential Rating Index Zip Markets
to spend their leisure time, what kinds of products (PRIZM) geocoding system to evaluate existing sites
do they purchase, what types of vehicles are they and current customers. For example, they not only
likely to drive, and what is their interest in and use profiled the shoppers at its five best-performing retail
of the latest technologies. outlets but also studied the branches that were not
doing very well. The profile of the shoppers would help
■ Where can I find them? What are the right places to the marketing team identify the shared characteristics of
look—rural, urban, inner-city, small-town, or subur- customers who frequent Eddie Bauer Stores. This
ban communities? The next step is to figure out a knowledge would be very helpful not only in deciding
way to get down to the blocks they live on. on new site locations, interior designs, and merchan-
■ How can I reach them? How can customers be dising mix but also in developing the store concept. This
attracted into Eddie Bauer stores and what are their detailed consumer information prepares Eddie Bauer to
media habits: television, radio, newspapers, maga- compete more efficiently in the ever-changing retail
zines, or the Internet? industry.

Questions for Discussion

1. What demographic and geographic information 4. Look at Clarita’s website (http://www.nielsen.com/

should Eddie Bauer collect to select store locations? us/en.html) and try to find answers to the four
2. What kind of information regarding the competi- questions of Eddie Bauer’s marketing team: Who
tive environment of the market in which Eddie are our best prospects? What are they like? Where can
Bauer operates is needed when choosing store I find them? How can I reach them?
locations?
3. Suggest methods by which Eddie Bauer can con- Source: This case was prepared by the authors
duct marketing research to identify the shared with the inputs from Eddie Bauer, Inc.
characteristics of those customers who frequent (www.eddiebauer.com) and Claritas, Inc.
Eddie Bauer stores versus the characteristics of (www.claritas.com).
customers who frequent the stores of competitors
at various locations.

21
CHAPTER 6—CASE

CASE 6-1 The data for this case were collected from grocery store
Promotion of Rocket Soups scanner installations in one market area, and consist of
1. Weekly store sales by brand
Soups provide an interesting case history through 2. Predominant price charged by brand by store
which to examine the impact of sales promotion. Soups 3. Occurrence of promotional activity by brand by store
are sold primarily through food stores and frequently
are promoted by both the manufacturer and the retailer. The data have been summarized across all stores
This case is based on 40 weeks of scanner sales history in the market on a weekly basis, for a total of 60 weeks.
in one city. Please answer all of the questions at the end Table 6-3 is the week-by-week summary.
of the case. At the weekly level, Table 6-4 shows the data on
the amount of volume moved by various promotions
at various prices. However, since the stores in the mar-
Background ket are of varying sizes, direct evaluation of promo-
Soups are purchased by over 75 percent of all house- tional effects is difficult. Therefore, the sales effects are
holds. On average, the time between purchases is normalized (adjusting for store sizes statistically).
around 40 days. Sales promotion, including features, Table 6-5 shows the normalized sales volume by pro-
displays, and price reductions, is extremely important motional type. The commonly used methods for store-
in this category, with around 55 percent of annual cat- level scanner data are (1) brand volume per $1,000,000
egory sales moving with some sort of sales promotion. total all commodity volume spending, and (2) brand
Shelf-price reductions, when they are used, average volume per 1,000 register checkouts.
about 30 percent. During the time of data collection, some extremely
The major competitors in this category are “hot” promotional activity occurred as the result of a
Rocket promotional program. Some retailers decided to
Brands Share use Rocket soup as a “loss leader” in addition to the
Rocket 19.7 manufacturer promotions, and combined both. These
activities resulted in substantial variations in price, vol-
Stellar 40.3
ume, and share of Rocket.
Tasty 13.4
Lovely 3.5 This case was prepared by V. Kumar for the pur-
pose of classroom discussion. For similar cases,
Happy 18.1 refer to J. C. Totten and M. P. Block, Analyzing
Smile 5.0 Sales Promotion, Chicago: Dartnell Corp., 1994.

Case Questions

Question 1 Question 2

According to Table 6-3, weeks 5, 12, 22, 23, 36, and 37 Table 6-4 shows overall promotional activity. Sales dur-
were highly important sales weeks for Rocket. Weeks ing week 12 were at an average price near zero. This
2, 8, and 31 were important sales weeks for the compe- typically arises out of a retail promotion of the type:
tition. If data on promotional activity are not known, its “Free box of Rocket given with total purchases of
presence is usually inferred by abnormally high sales $10.00 or more.” Table 6-5 shows sales levels adjusted
of the brand or category, a cut in price, or both. Review- for the percentage of stores in each class, and for their
ing these weeks, and nearby weeks, discuss the effects relative sizes. Discuss any difficulties you see in
on Rocket and its competitors on assessing the impact of the week 12 promotion on
1. Incremental volume to Rocket
1. Total category volume 2. Promotional volume borrowed from future sales
2. Total category dollar spending
3. Each other’s volume (Rocket’s and competitors’)
4. Sales in the weeks following high volume movement
22
Question 3 Question 4

Using Table 6-5, plot only the nonpromoted sales ver- Using Table 6-5, plot the relationship between sales on
sus the nonpromoted price. Discuss the probable per- display only, and display-only price. What similarities
cent impact on Rocket sales from a 10 percent increase and differences in sales levels and response to price do
or decrease in price. you see in comparing the display-only response to the
nonpromotional response?

CASE 6-2 on share of total sales for the first and second halves of
Kerry Gold Products, Ltd. the year. This distinction was important because
Kerry Gold had spent relatively little on promotion in
In late May of 1996 the research manager for Kerry the second half of the year. Since Nielsen had full
Gold Products met with the product manager for mar- records of all sales, they were also able to examine their
garine to review the company’s first experience with share of sales during weeks when no brands offered
Nielsen scanner data. A year-long test in a single chain price-reduction promotions. These data are shown in
organization, which began in April 1995, had been the two right-hand columns in Table 6-6.
completed recently. While reviewing these results, the research man-
The first purpose of their review was to interpret ager also was wondering whether scanner data would
the findings. They decided to concentrate on the results be useful for other grocery products sold by Kerry
of the first 18 weeks of the tests, which are summarized Gold. Many of them were as heavily promoted as mar-
in Figure 6-4. The size of the bars represents the weekly garine. Judgments on the desirability of consumer pro-
unit sales for Kerry Gold brand and the three compet- motions for these products usually were based on a
ing brands also sold by the chain organization. In combination of store audit data plus periodic controlled
addition to the weekly data there were summary data experiments.

CASE 6-3 though he could recite their contents from memory.

Paradise Foods1 Horton was waiting for his boss, Bob Murphy, to report
by Steven H. Star and back the decision on a subject the marketing commit-
Glen L. Urban tee had been debating for more than four hours. The
issue—whether Paradise Foods should authorize
Introduction national rollout of a new product, Sweet Dream, to
Bill Horton sat alone in his office late Friday afternoon complement its established frozen specialty dessert,
anxiously leafing through computer printouts, even LaTreat. Horton was product manager for Sweet
Dream, and Murphy was the group manager responsi-
ble for all new products in Paradise’s dessert line.
1
Steven H. Star is director of the marketing center at MIT’s Sloan
“I’m glad you’re sitting,” Bob quipped uncomfort-
School of Management. Glen L. Urban is Dai-Ichi Kangyo Bank ably as he entered Bill’s office. “The news isn’t good.
Professor of Management and deputy dean of the Sloan School. This The committee decided not to go ahead.”
case is reprinted with permission from Harvard Business Review, “I don’t believe it,” Bill protested, “I started to
September–October 1988. worry when the meeting dragged on, but I never

23
TABLE 6-3
City Sales of Soup by Week (Price is Volume-Weighted Average)

Rocket Rocket Category Category Rocket Rocket Competitive

Week Volume Dollars Volume Dollars Price Share Volume

1 306 250 5,984 4,356 0.82 5.1 5,678

2 345 384 14,288 9,780 1.11 2.4 13,943
3 873 694 6,201 4,893 0.79 14.1 5,328
4 900 715 5,657 4,447 0.79 15.9 4,757
5 4,404 2,772 7,673 5,453 0.63 57.4 3,269
6 456 388 5,027 4,196 0.85 9.1 4,571
7 444 395 5,570 4,687 0.89 8.0 5,126
8 513 507 11,519 8,305 0.98 4.5 11,006
9 483 441 4,661 3,917 0.91 10.4 4,178
10 615 548 4,803 4,381 0.89 12.8 4,188
11 624 571 5,038 4,632 0.91 12.4 4,414
12 16,113 705 19,633 3,982 0.04 82.1 3,520
13 1,056 811 4,476 3,967 0.76 23.6 3,420
14 381 375 3,863 3,599 0.98 9.9 3,482
15 534 526 5,014 4,677 0.98 10.6 4,480
16 1,821 870 6,487 5,257 0.47 28.1 4,666
17 390 384 3,642 3,350 0.98 10.7 3,252
18 405 398 3,743 3,441 0.98 10.8 3,338
19 1,152 1,012 5,042 4,865 0.87 22.8 3,890
20 348 342 4,733 4,248 0.98 7.4 4,385
21 378 372 3,862 3,448 0.98 9.8 3,484
22 5,319 5,129 8,352 7,839 0.96 63.7 3,033
23 2,280 1,691 7,086 5,311 0.74 32.2 4,806
24 1,194 962 5,931 4,878 0.80 20.1 4,737
25 1,020 837 5,708 4,666 0.82 17.9 4,688
26 342 336 7,780 5,849 0.98 4.4 7,438
27 1,509 1,378 5,385 5,191 0.91 28.0 3,876
28 420 413 7,352 5,533 0.98 5.7 6,932
29 528 520 7,516 5,661 0.98 7.0 6,988
30 942 676 6,416 5,461 0.71 14.7 5,474
31 957 711 15,599 7,578 0.74 6.1 14,642
32 1,014 738 4,937 4,294 0.72 20.5 3,923
33 1,059 990 5,664 5,213 0.93 18.7 4,605
34 351 385 9,045 7,302 1.09 3.9 8,694
35 384 418 5,435 4,932 1.09 7.1 5,051
36 4,122 3,084 8,672 7,699 0.74 47.5 4,550
37 9,108 4,466 13,165 8,694 0.49 69.2 4,057
38 498 542 5,643 5,103 1.09 8.8 5,145
39 459 500 5,555 5,150 1.09 8.3 5,096
40 486 529 4,485 4,285 1.09 10.8 3,999

24
TABLE 6-4
City Sales of Soup by Week (Price is Volume-Weighted Average Sales by
Promotional Type)

Volume Price
Volume Price Volume Price with with
Volume Price with with with with Feature Feature
with No with No Display Display Feature Feature and and
Week Promotion Promotion Only Only Only Only Display Display

1 306 0.82 0 . 0 . 0 .
2 345 1.11 0 . 0 . 0 .
3 477 0.75 396 0.85 0 . 0 .
4 420 0.75 480 0.84 0 . 0 .
5 222 0.69 0 . 0 . 4,182 0.63
6 399 0.83 57 0.99 0 . 0 .
7 375 0.87 69 0.99 0 . 0 .
8 471 0.98 42 1.07 0 . 0 .
9 405 0.90 78 0.99 0 . 0 .
10 486 0.87 129 0.99 0 . 0 .
11 537 0.90 87 0.99 0 . 0 .
12 486 0.79 102 0.85 0 . 15,525 0.02
13 384 0.75 0 . 0 . 672 0.78
14 381 0.99 0 . 0 . 0 .
15 534 0.99 0 . 0 . 0 .
16 267 0.87 153 0.98 0 . 1,401 0.35
17 390 0.99 0 . 0 . 0 .
18 405 0.98 0 . 0 . 0 .
19 315 0.81 672 0.89 60 0.98 105 0.98
20 348 0.99 0 . 0 . 0 .
21 378 0.98 0 . 0 . 0 .
22 201 0.69 0 . 0 . 5,118 0.98
23 0 . 702 0.86 1,578 0.69 0 .
24 819 0.86 375 0.69 0 . 0 .
25 366 0.74 654 0.86 0 . 0 .
26 252 0.98 90 0.99 0 . 0 .
27 117 0.99 288 0.99 585 0.89 519 0.88
28 327 0.98 93 0.99 0 . 0 .
29 309 0.98 219 0.99 0 . 0 .
30 588 0.74 354 0.69 0 . 0 .
31 450 0.73 507 0.75 0 . 0 .
32 333 0.69 288 0.69 195 0.79 198 0.79
33 555 0.87 504 1.01 0 . 0 .
34 303 1.10 48 1.12 0 . 0 .
35 384 1.09 0 . 0 . 0 .
36 132 0.89 0 . 0 . 3,990 0.74
37 0 . 2,409 0.74 0 . 6,699 0.40
38 498 1.09 0 . 0 . 0 .
39 459 1.09 0 . 0 . 0 .
40 486 1.09 0 . 0 . 0 .

25
TABLE 6-5
City Sales of Soup by Week (Price is Volume-Weighted
Average Normalized Volume Sales by Promotional Type)

Normal Normal Normal Price

Normalized Volume Price Volume Price Volume with
Volume Price with with with with with with Feature
with No No Display Display Feature Feature Feature and
Week Promotion Promotion Only Only Only Only and Display Display

1 0.21 0.82 0.00 . 0.00 . 0.00 .

2 0.20 1.11 0.00 . 0.00 . 0.00 .
3 0.45 0.75 0.66 0.85 0.00 . 0.00 .
4 0.50 0.75 0.63 0.84 0.00 . 0.00 .
5 0.60 0.69 0.00 . 0.00 . 3.94 0.63
6 0.33 0.83 0.32 0.99 0.00 . 0.00 .
7 0.24 0.87 0.36 0.99 0.00 . 0.00 .
8 0.31 0.98 0.27 1.07 0.00 . 0.00 .
9 0.30 0.90 0.34 0.99 0.00 . 0.00 .
10 0.36 0.87 0.50 0.99 0.00 . 0.00 .
11 0.41 0.90 0.41 0.99 0.00 . 0.00 .
12 0.50 0.79 0.45 0.85 0.00 . 3.95 0.02
13 0.38 0.75 0.00 . 0.00 . 1.14 0.78
14 0.25 0.99 0.00 . 0.00 . 0.00 .
15 0.26 0.99 0.00 . 0.00 . 0.00 .
16 0.34 0.87 0.65 0.98 0.00 . 2.05 0.35
17 0.25 0.99 0.00 . 0.00 . 0.00 .
18 0.27 0.98 0.00 . 0.00 . 0.00 .
19 0.70 0.81 1.85 0.89 0.15 0.98 0.48 0.98
20 0.21 0.99 0.00 . 0.00 . 0.00 .
21 0.27 0.98 0.00 . 0.00 . 0.00 .
22 0.57 0.69 0.00 . 0.00 . 4.79 0.98
23 0.00 . 0.64 0.86 3.77 0.69 0.00 .
24 0.65 0.86 0.98 0.69 0.00 . 0.00 .
25 0.55 0.74 0.80 0.86 0.00 . 0.00 .
26 0.21 0.98 0.28 0.99 0.00 . 0.00 .
27 0.43 0.99 0.82 0.99 1.55 0.89 0.79 0.88
28 0.26 0.98 0.29 0.99 0.00 . 0.00 .
29 0.24 0.98 0.67 0.99 0.00 . 0.00 .
30 0.48 0.74 1.15 0.69 0.00 . 0.00 .
31 0.45 0.73 0.95 0.75 0.00 . 0.00 .
32 0.55 0.69 0.93 0.69 0.96 0.79 0.55 0.79
33 0.52 0.87 0.88 1.01 0.00 . 0.00 .
34 0.22 1.10 0.36 1.12 0.00 . 0.00 .
35 0.25 1.09 0.00 . 0.00 . 0.00 .
36 0.37 0.89 0.00 . 0.00 . 2.98 0.74
37 0.00 . 1.92 0.74 0.00 . 18.61 0.40
38 0.29 1.09 0.00 . 0.00 . 0.00 .
39 0.26 1.09 0.00 . 0.00 . 0.00 .
40 0.29 1.09 0.00 . 0.00 . 0.00 .

26
 21,715 19,340 19,468 Kerry Gold brand
16,773
Regular 1 lb. 58¢

773 772 935 797

599 634 747 737 601 746 744 723 706 586

58¢ 38¢ 58¢ 38¢ 58¢ 38¢ 58¢ 38¢ 58¢

Brand B
5,927 6,460
Regular 1 lb. 49–54–58¢
2,960

1,713 1,359 1,268 1,239 1,513 1,127

1,256 1,246 1,231 976 1,017 1,188 1,318 1,076
971

49¢ 54¢ 49¢ 58¢ 50¢ 58¢ 50¢

Brand C
13,908 10,014 8,650 Regular 1 lb. 49–58¢

2,319 2,653
1,742 1,810 1,689
1,355 1,235 1,184 1,450
981 1,021 1,159 1,224 1,260 1,058

38¢ 58¢ 49¢ 44¢ 49¢ 58¢ 49¢ 58¢ 50¢ 58¢

Brand D
4,886 6,174 Regular 1 lb. 54–58¢ 5,441

2,462
1,810
1,559 1,014
790 857 753 683
474 611 596 578 675 532
529

54¢ 44¢ 54¢ 44¢ 54¢ 49¢ 58¢ 49¢ 58¢

1 8 15 22 29 6 13 20 27 3 10 17 24 1 8 15 22 29
April '85 May June July
Weeks
FIGURE 6-4
Unit sales per week (and prevailing price for the brand during the week).

TABLE 6-6

Share of Sales in
Nonpromotional
Share of Total Sales (%) Weeks (%)

Brand 1st 12 yr 2nd 12 yr 1st 12 yr 2nd 12 yr

Kerry Gold 39 (34)* 13 (7) 18.9 19.3

B 17 (8) 42 (35) 30.4 30.3
C 29 (13) 28 (18) 33.1 33.9
D 15 (11) 17 (12) 17.6 16.5
(66) 100 (72) 100 100
*Figures in parentheses are deal merchandise shares of market. In the first half of the year, 66 percent of total unit
sales in the category were on deal.
27
thought they’d say no. Damn. Eighteen months down Bill understood the importance of LaTreat, but he
the drain.” was not the type to mince words. “You and I both
“I know how you feel, but you have to understand know things are more complicated than Barbara would
where the committee was coming from. It was a real have people believe,” he told Bob. “There wasn’t the
close call—as close as I can remember since I’ve had same cannibalization effect in Marion and Corvallis.
this job. But the more carefully they considered your And we never did a test in Midland and Pittsfield
tests results, the more it looked like the returns just where Barbara’s people were free to defend LaTreat. We
weren’t there.” might be able to have it both ways . . .”
“Not there? All they had to look at was Appendix B Bob interrupted. “Bill, we could stay here all night
in my report—the data from Midland and Pittsfield: Sweet on this. But what’s the point? The committee’s made its
Dream got a 3 percent share after 26 weeks. A trial rate of decision. You don’t like it, I don’t like it. But these aren’t
15 percent. A repurchase rate of 45 percent. If national stupid people. It’s hard to argue with the dessert group’s
performance were anywhere close to that, we’d have our batting average over the last five years. This may ring
launch costs back in 14 months. Who can argue with that?” hollow right now, but you can’t take this personally.”
“I’m on your side here, but I only had one vote,” “That’s easy for you to say,” Bill sighed.
Bob said defensively. “We both knew what Barbara’s “You know how this company works,” Bob
position was going to be—and you know how much reminded him. “We don’t hold withdrawal of a new
weight she carries around here these days.” Barbara product against the manager if withdrawal is the right
Mayer was the Paradise group manager responsible for decision. Hell, it happened to me ten years ago with
established dessert products. She became a “grouper” that dumb strawberry topping. It made sense to kill
in 1985, after two enormously successful years as that product. And I was better off at the company for
LaTreat’s first product manager. it. The fact is, the committee was impressed as hell
“And to be honest, it was tough to take issue with with the research you did—although to be honest, you
her,” Bob continued. “What’s the point of introducing may have overwhelmed them. A 40-page report with
Sweet Dream if you end up stealing share from 30 pages of appendixes. I had trouble wading through
LaTreat? In fact, Barbara used some of your data it all. But that doesn’t matter. You did a good job, and
against us. She kept waving around Appendix C, grip- the people who count know that.”
ing that 75% of the people who tried Sweet Dream had “I appreciate the sentiment, but that’s not why I
bought LaTreat in the previous four weeks. And repur- think this is the wrong decision. Sweet Dream is a go
chase rates were highest among LaTreat heavy users. on the merits.”
You know how the fourteenth floor feels about LaTreat. “Go home, play some golf this weekend,” Bob
Barbara claims that adjusting for lost LaTreat sales counseled. “Things won’t seem so bleak on Monday.”
means Sweet Dream doesn’t recover its up-front costs Bill never made it to the country club. Instead, he
for three years.” spent the weekend worrying about his future at Par-
adise and puzzling over how the marketing committee
could have reached its no-launch decision.
LaTreat
Launched in 1983, LaTreat was the first “super pre-
mium” frozen dessert to enter national distribution. It Sweet Dream Proposal
consisted of 3.5 ounces of vanilla ice cream dipped in Paradise Foods was a large, successful manufacturer of
penuche fudge and covered with almonds. An indi- packaged foods and household products whose mar-
vidual bar sold for just under $2 and a package of four kets were becoming increasingly competitive. Bill
was $7. Unlike LaTreat, which came on a stick, Sweet believed that Paradise was vulnerable in this treacher-
Dream resembled an ice cream sandwich. It consisted ous environment because of its failure to keep pace
of sweet-cream ice cream between two oversized with technological change—in particular, the increasing
chocolate chip cookies and coated with dark Belgian sophistication of marketing research based on com-
chocolate. Its price was comparable to LaTreat’s. puter modeling, supermarket scanner data, and tar-
Under Barbara Mayer, annual sales of LaTreat soon getable cable television. Paradise certainly used these
reached $40 million, and it began making a significant tools, but to Bill’s way of thinking, top management
contribution to dessert groups profits. It accounted for didn’t embrace them with the same enthusiasm as
almost 5 percent of the market despite a price about other companies.
50 percent higher than standard frozen specialties. When Bill became produce manager for Sweet
Lately, however, competition had stiffened. LaTreat Dream, he promised himself he would do a state-of-
faced tough challenges from three direct competitors as the-art research job. The plan was to compare the
well as several parallel concepts (like Sweet Dream) at performance of Sweet Dream in two test markets
various stages of test marketing. The total frozen spe- exposed to different advertising and promotion strate-
cialties market had grown fast enough to absorb these gies. The campaign in Midland, Texas, and Pittsfield,
new entrants without reducing LaTreat sales, but rev- Massachusetts, struck an overtly self-indulgent tone—
enues had been essentially flat through 1986 and 1987. “Go Ahead, You Deserve It”—and used limited price
28
promotion to induce trial. The campaign in Marion, Corvallis, but the Sweet Dream numbers weren’t as good
Indiana, and Corvallis, Oregon, emphasized superior either. Trial was acceptable, but repurchase was low. We
quality—“Taste the Goodness”—and used promotion might make money, but we’d never meet the hurdle rate.
aggressively. Sunday newspapers in the two cities Every so often a product just falls between two stools.”
frequently carried 50-cents-off coupons, and Sweet “So we’ll do more tests,” Bill countered. “We can
Dream boxes included a 75-cent rebate voucher. play with the positioning in Marion and Corvallis. Or
Bill used two computer-based research services— we can start from scratch somewhere else. I can have
InfoScan and BehaviorScan—to evaluate Sweet Dream’s us wired to go in three weeks.”
performance and long-term potential.2 InfoScan tracks “We’ve already taken 18 months on Sweet Dream,”
product purchases on a national and local basis for Barbara said. “The committee felt it was time to try
the packaged-goods industry. It collects point-of-sale new concepts. I don’t think that’s so unreasonable.”
information on all bar-coded products sold in a repre- “You’re forgetting two things,” Bill replied. “First,
sentative sample of supermarkets and drugstores. It with freezer space as tight as it is, the longer it takes to
generates weekly data on volume, price, market share, come up with another product, the harder the stores are
the relationship between sales and promotional offers, going to squeeze us. Second, other people are going to
and merchandising conditions. Bill subscribed to find out how well Sweet Dream did in Midland and
InfoScan to monitor competitive trends in the frozen Pittsfield. We’re the only ones who get the Behav-
specialties segment. iorScan numbers, but you know the competition is
BehaviorScan is used in marketing tests to measure monitoring our tests. What do you think Weston &
the effect of marketing strategies on product purchases. Williams is going to do when it sees the results? It’ll
In a typical BehaviorScan test, one group of consumer have a Sweet Dream clone out in a few months if we
panelists is exposed to certain variables (that is, print or don’t launch.”
television advertisements, coupons, free samples, in- Weston & Williams (W & W) was a leading sup-
store displays), while other participating consumers plier of household products that was diversifying into
serve as a control group. Company analysts use super- foods, including desserts. It had a reputation as a
market scanner data on both groups of consumers (who conservative company that insisted on exhaustive
present identification cards to store checkout clerks) to prelaunch research. But the trade press recently had
evaluate purchasing responses to marketing campaigns. reported on W & W’s decision to rush Pounce—a
A typical BehaviorScan test lasts about one year. combination detergent, colorfast bleach, and fabric
Bill Horton’s research program had generated a softener—to the market on the basis of very prelimi-
stack of computer printouts several feet high. He had nary tests and data from a competitior’s test markets.
spent much of the spring trying to unravel the complex W & W had thus become the first national entrant in
interactions between different advertising and promo- the “maxiwash” category.
tion strategies for Sweet Dream, the various promotion “Bob made that argument Friday,” Barbara said.
deals Paradise was running on LaTreat, and the prolif- “But you can guess how far he got. The guys upstairs
eration of other frozen specialties. Despite Bob’s advice have a tough enough time taking our own computer
to relax, Bill spent Sunday afternoon in front of his data seriously. They don’t buy the idea that someone
home computer, massaging the data one last time. else is going to jump into the market based on our tests.
Plus, that would be a huge risk. Pounce may have
Competitive Analysis given Weston & Williams all the gray hair they can
On Monday, Bill arrived at his office a few minutes late. stand for a few years.”
He was surprised to find Barbara Mayer waiting on him. “From what I can tell, Barbara, the only issue that
“Sorry to drop in on you first thing,” she said, “but counted was cannibalization.” Bill’s voice betrayed a
I wanted to let you know what a fantastic job you did on rekindled sense of frustration. “I understand you want
the Sweet Dream test. I’m sure you were disappointed to protect LaTreat. I understand the company wants to
with the committee’s decision, and in a way I was too. It protect LaTreat. But it seems to me we’re protecting a
would have been great to work together on the rollout. product that is getting tired.”
But the data were pretty clear. We didn’t have a choice.” “What are you talking about?” Barbara objected.
“Well, I thought the data were clear too—but in the “Profits aren’t growing as fast as they used to, but
opposite direction.” they’re not dropping either. LaTreat is solid.”
“Come on, Bill, you can understand the logic of
the decision. The Midland and Pittsfield numbers were
Sales Analysis
fine, but they were coming at the expense of LaTreat.
“Come on, Barbara. Your people have really been pro-
There wasn’t so much cannibalization in Marion and
moting it in the last two quarters—shifting money out
of print and TV and into coupons and rebates. Total
2
InfoScan and BehaviorScan are actual services offered by Informa- spending hasn’t changed, so profits are OK. But LaTreat
tion Resources, Inc. has gotten hooked on promotion. And all the wrong
29
 $50

Millions of dollars
$40
$30
$20 Nominal sales
Average sales
$10 Sales without promotion
0
Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar
1987 1988
FIGURE 6-5
LaTreat sales with and without promotions (seasonally adjusted figures presented
on an annualized basis).

kinds of promotion. You’ve got people accelerating redeemers fell into the last two categories, with “loyalists”
future purchases and price-sensitive types jumping in accounting for a shrinking percentage of sales.
whenever LaTreat goes on sale. Who needs that?” Finally, Bill called up his ultimate evidence—a
“Where are you getting this stuff?” Barbara graph that adjusted LaTreat sales to eliminate the effect
demanded, “I didn’t see it in your report.” of promotions. (See Figure 6-5.)
“I spent the weekend running some more num- “I’m amazed you spent your weekend doing this,”
bers.” Bill replied. “Take a look at this.” Barbara said, “but I’m glad you did. It’ll help us think
Bill punched a few buttons on his computer key- through future marketing strategies for LaTreat. But it
board and called up a series of graphs. The first docu- doesn’t change what the committee decided. It’s time
mented the growing percentage of LaTreat sales to move on.”
connected with promotional offers. A second graph dis- “I’m not so sure,” Bill replied. “I hope you don’t
aggregated LaTreat’s promotion-related sales by four mind, but I think I should show these data to Bob.
buyer categories Bill had created from BehaviorScan Maybe he can convince the committee to reconsider.
data. “Loyalists” were longtime customers who After all, if LaTreat is weakening, its going to show up
increased their purchases in response to a deal. “Trial in your profit figures sooner or later.”
users” bought LaTreat for the first time because of the “Data don’t make decisions, Bill, people do. And the
promotion and seemed to be turning into loyal customers. people on the marketing committee have been in the
“Accelerators” were longtime customers who used industry a lot longer than you. Their gut tells them
coupons or rebates to stock up on product they would things your computer can’t. Besides, you and I both
have bought anyway. “Switch-on-deal” customers were know that when you collect this much data, you can
nonusers who bought LaTreat when there were promo- make it show just about anything. Go ahead and talk to
tions but demonstrated little long-term loyalty. Bill’s Bob, but I’m sure he’ll see things the same way I do.”
graph documented that a majority of LaTreat’s coupon

Assignment

1. What (if any) issues did Bill Horton overlook in additional research you feel should be conducted
evaluating Sweet Dream? before a final decision on the Sweet Dream launch
2. Do you think Sweet Dream should be launched? is made?
Give the rationale for your answer. Is there any

30
CHAPTER 7—CASE

om/ c o l
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CASE 7-1 (IMC), a top-notch local marketing consulting firm, for
w. wi l ey

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ge / aak

Caring Children’s Hospital addressing these issues and suggesting an expansion

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plan. A meeting was set up with Dr. K, president of
Mary Beth, President of Caring Children’s Hospitals IMC, to discuss the issues involved and to explain the
(CCH), always looked forward to New Years. New details of a home health-care program. Dr. K suggested
Years were meant for family reunions and holidays for using the Internet to analyze the scope for a new player
her. But this New Year had something totally different in the industry, the trends in the industry, the common
in store for her. The previous year had not been good modes of payment available, the costs involved per
for the hospital revenues. The number of patients patient, the profit margins possible, and the kinds of
served by the hospital had gone down, and the costs of diseases requiring home health care. The Internet was
health care were rising. The balance sheet presented a selected for secondary data analysis because of its speed
very sorry picture to her. But there was a glimmer of and availability of up-to-date information.
hope in the gloomy balance sheet. Dr. K used several search engines available in the
About two years ago, Mary had started a small Internet, such as Lycos, Infoseek, and AltaVista, to get a
division within CCH that provided health care for dis- wide and varied coverage of the Internet. The informa-
abled children in their houses. This division resembled tion collected from the Internet suggested that the home
a home health-care facility, but Mary was wary about health-care industry was booming and that pediatric
developing this division into a full-fledged home home health care had a significant share in the market.
health-care organization within CCH. This division had The results also suggested that given a choice, people
been doing well for the past two years. It was the only would prefer to receive the needed care in their homes.
division in CCH with a positive picture in the balance Also, the cost involved in serving patients at their houses
sheet. Mary decided to develop the home health-care was significantly less and it was fully covered by
division in the hospital to get around the problems fac- Medicare. Home health care was also found to be
ing the hospital’s financial situation. the fastest growing health-care segment in the nineties.
But there were a lot of issues to be addressed, such The diagnoses most often referred to home health care
as the kind of expansion plan to adopt, the kind of ser- were found to be favorable to CCH. These results
vices to be provided by the home health-care facility, the formed the base for conducting primary research in the
kind of insurance plans that the patients would be able market. The use of the Internet allowed Dr. K to analyze
to use, and the type of publicity to use. Mary decided a wide range of issues within a short time frame.
to use the services of Innovative Marketing Consultants

Questions for Discussion

1. Use the Internet to corroborate the findings of Dr. K. The case was prepared by V. Kumar and Rajkumar
2. Prepare a report based on the information that you Venkatesan for the purpose of classroom discussion.
have collected.
3. What are your recommendations to Mary, based on
your findings?

31
CHAPTER 8—CASE

CASE 8-1 competitors appear. Andy Smyth thought it imperative

Mountain Bell to learn exactly what competitive products were mak-
ing inroads, in what applications, and the basis of their
Telephone Company competitive appeal. He also felt the need for some objec-
tive in-depth information as to how major Mountain
Jim Martin, marketing research manager for Mountain
Bell customers in the health-care industry perceived the
Bell, studied the final research design for the hospital
company’s product line and its sales force. He hypoth-
administrator study that had been prepared by Industrial
esized that the sales force was generally weak in terms
Surveys, a marketing research firm in Denver. He realized
of understanding customers’ communication needs and
that he needed to formulate some recommendations with
problems. He felt that such information would be par-
respect to some very specific questions. Should individ-
ticularly helpful in understanding customers’ concerns
ual personal interviewers be used as suggested by Indus-
and in developing an effective sales training program.
trial Surveys, or should a series of one to six focus-group
He hoped that the end result would be to make the sales
interviews be used instead? Was the questionnaire satis-
force more customer oriented and to increase revenues
factory? Should individual questions be added, deleted,
from the health-care market.
or modified? Should the flow be changed? Exactly who
While at Eastern Bell, Andy Smyth had initiated a
should be sampled, and what should the sample size be?
mail survey of hospital administrators that had been of
Research Setting some value. Several months before, he had approached
About 20 field salespeople at Mountain Bell Telephone Jim Martin with the idea of doing something similar at
Company were involved in sales of communication Mountain. Jim’s reaction was that the questionnaire
equipment and services to the health-care industry. previously used was too general (that is one question
Because of job rotations and reorganizations, few sales- was: What basic issues confront the health-care area?)
people had been in their present positions for more or too difficult to answer (How much do you budget
than three years. They were expected to determine cus- monthly for telecommunications equipment or service?
tomer needs and problems and to design responsive 0–$1,000; $1,000–$2,000; etc.) Further, he felt that in-
communication systems. In addition, there was a depth individual interviews would be more fruitful.
health-care industry manager, Andy Smyth, who had Thus, he contacted Industrial Surveys, which, after con-
overall responsibility for the health-care industry mar- siderable discussion with both Jim and Andy, created
keting effort at Mountain Bell, although none of the the research design. They were guided by the following
sales personnel reported directly to him. He prepared research objectives:
a marketing action plan and worked to see that it was
implemented. The marketing action plan covered: 1. What are the awareness and usage levels of
competitive telecommunications products by the
Sales objective by product and by segment hospital?
Sales training programs 2. What is the perception of Mountain Bell’s sales force
Development of sales support materials and capabilities as compared to other telecommunica-
information tions vendors?
3. What is the decision-making process as it pertains to
Andy Smyth was appointed only recently to his the identification, selection, and purchase of telecom-
current position, although he had worked in the health- munications equipment?
care market for several years while with the Eastern 4. What concerns/problems impact most directly upon
Bell Telephone Company. Thus, he did have some first- the hospital’s (department’s) daily operations?
hand knowledge of customer concerns. Further, there 5. What are the perceived deficiencies and suggestions
was an AT&T marketing plan for the health-care indus- for improvement of work/information flow?
try which included an industry profile; however, it
lacked the detailed information needed, especially at Research Design
the local level. It also lacked current information as to Research interviews will be conducted in seven Denver
competitive products and strategies. area hospitals with the hospital administrator and,
Mountain Bell had long been a quasi-monopoly, where possible, with the financial officer and the
but during the past decade had seen vigorous aggressive telecommunications manager. A total of 14 interviews

32
are planned. Interviews will be held by appointment, 4. What supplier information is most important in
and each respondent will be probed relative to those facilitating the purchasing decision? How effec-
questions that are most appropriate for his or her posi- tive has the Mountain Bell sales force been in pro-
tion and relevant to the study’s overall objectives. The viding such information?
cost will be from $6,500 to $8,500, depending on the D. Specification of the Most Important Problems or
time involved to complete the interviews. The ques- Concerns Relating to Effective Hospital Management
tionnaire to be used follows. 1. What are the most important problems or con-
cerns confronting you in managing the hospital?
A. Awareness and Usage of Competitive Telecommu- 2. What type of management data is required in
nications Equipment order to deal effectively with these problems or
1. What departments presently use non-Bell voice concerns?
communications equipment (paging, intercom, 3. How are these data presently recorded, updated,
message recording, etc.)? What were the main and transmitted? How effective would you say
considerations in selecting this equipment? your current information-retrieval system is?
2. What departments use non-Bell data terminals 4. Do you have any dollar amount specifically bud-
(CRTs)? What are the major functions/activities geted for data or telecommunications improve-
that this equipment is used for? What were the ments in 2004–2005? What specific information
main considerations in selecting this equipment? or communication functions are you most inter-
3. How do you view the capabilities of Bell System ested in upgrading?
voice-communications equipment to meet your E. Achieving Maximum Utilization of Hospital Facilities
operations needs? 1. Do you experience any problems in obtaining
4. How do you view the capabilities of Bell Sys- accurate, up-to-date information on the availabil-
tem data terminals to meet your records- and ity of bed space, operating rooms, or lab services?
information-retrieval needs? 2. Do you see _________ hospitals as competing
5. What do you feel are Mountain Bell’s main with other area hospitals or HMOs in the provi-
strengths and/or weaknesses in meeting your sion of health-care services? If so, with which
hospital’s overall telecommunications needs? hospitals? Do you have a marketing plan to deal
B. Perceptions of the Mountain Bell Sales Force with this situation?
1. What should a telecommunications specialist F. Efficient Use of Labor Resources
know about the hospital industry in order to ade- 1. How variable is the typical daily departmental
quately address your voice-communications and workload, and what factors most influence this
data-processing needs? variance?
2. Have you ever worked with any Mountain Bell 2. How do you document and forecast workload
marketing people in terms of your communica- fluctuations? Is this done for each hospital
tions needs? If so, how knowledgeable do you department?
perceive the Mountain Bell sales force to be with 3. To what extent (if any) do you use outside con-
respect to both the health-care industry and their sulting firms to work with you in improving the
telecommunications equipment? How do they delivery of hospital services?
compare to non-Bell vendors of such products? G. Reimbursement and Cash Flow
C. Purchasing Decision 1. Which insurer is the primary provider of funds?
1. What is the standard procedure for selecting and How is reimbursement made by the major
authorizing a telecommunications purchase? Is insurers?
this based primarily on the dollar amount in- 2. What information do you need to verify the exis-
volved or type of technology? tence and type of insurance coverage when an
2. Who has the greatest input on the telecommuni- individual is being processed for admission or
cations decision (department manager, adminis- outpatient hospital services? What, if any, prob-
trator, physicians, and so on)? lems are experienced in the verification and com-
3. What are the most important considerations in munication of insurance information?
evaluating a potential telecommunications pur-
chase (equipment price, cost-savings potential, Source: This case was prepared by D. Aaker
available budget, and so on)? and J. Seydel as a basis for class discussion.

33
CASE 8-2 research questions to obtain background information
U.S. Department of Energy (A) and to formulate testable hypotheses.

Current Use of Windmills in the United States

Judy Ryerson, the head of the windmill power section How many power-generating windmills are there?
of the U.S. Department of Energy, was considering Who owns them? What power-generating performance
what types of qualitative marketing research would be is being achieved? What designs are being used? What
useful to address a host of research questions. applications are involved?
The U.S. Department of Energy was formed to deal
with the national energy problem. One of its goals was Public Reaction
to encourage the development of a variety of energy What are the public attitudes to various power sources?
sources, including the use of windmill power. One dif- How much premium would the public be willing to pay
ficulty was that almost nothing was known about the for windmill power sources, both in terms of money and
current use of windmill power and the public reaction in terms of “visual pollution?” What is the relative accept-
to it as a power source. Before developing windmill ance of six different windmill designs ranging from the
power programs, it seemed prudent to address several “old Dutch windmill” design to an egg-beater design?

Assignment

Design one or more qualitative research designs to considered, provide a set of questions to guide the
address the search questions and to develop hypo- moderator.
theses for future testing. If focus-group interviews are

om/ c o l
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CASE 8-3
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want performance plus status, prestige, comfort, and

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Acura luxury. So far, Acura has struggled to justify prices

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and convince buyers that the $40,000 maximum price
Acura was introduced into the U.S. luxury market in on the Acura Legend will include those attributes.
1986 as a premium car at a bargain price, compared In the desire to “retool its image,” Acura replaced
with European luxury imports. Given a $20,000 price its performance-based ads with luxury ads, such as a
tag, it became the best-selling premium import brand. campaign nicknamed “Chanel ads,” featuring man-
As long as it could underprice the competition, sions with cobblestone driveways and a towel-draped
Acura’s sales were steady. In 1992, however, European woman getting a massage in a gazebo. The tag line
luxury brands such as Mercedes, BMW, and Audi reads, “Some things are worth the price.” Competition
started slashing their prices, and the value of the has rebutted by claiming that their $13,000 Altima was
Japanese yen rose. Both factors combined to wipe out “worth far more than the price.”
Acura’s “premium car at a bargain price” advantage. Other efforts by Acura to “retool” their image have
Another blow came when archrivals Toyota Motor included promotional tours with Cirque du Soleil. Buyers
Corp. and Nissan Motor Corp. launched the Lexus might be getting mixed signals. One-third of Acura’s
and Infiniti, even more upscale brands, starting at regional budget is allocated to dealerships, which typi-
$35,000. cally run hard-sell rather than image ads. Acura has also
struggled to convince dealers to upgrade their show-
I. Campaign Time rooms to fit the luxury image. The line’s well-established
Acura did not anticipate the resurgence of the European brand names, Legend and Integra, will soon be replaced
luxury brands. Acura is strong in quality, depend- by bigger, more luxurious cars designed to compete with
ability, and value, but it does not perform well in the top-of-the-line, $50,000-plus Lexus and Infiniti models.
luxurious, expensive-looking, and prestige depart- Equipped with a smaller engine, RL model Acura cars
ments. However, as Acura discovered, customers will sell for $10,000 less.

34
II. Issues experiencing. Will the prestige pitch work to rescue lag-
Luxury service and new luxury products will be required ging sales?)
to win customers. Should Acura keep pouring dollars into
the image campaign, or stick to performance and quality, Source: This case is based on Larry Armstrong,
its strengths? What do the consumers want? Design a for- “Acura: Stuck between Gears?,” Business Week,
mat for a focus-group discussion to analyze this situation. October 2, 1995, pp. 136–137, and was prepared by
(Hint: Consider three formats: exploratory, clinical, V. Kumar for classroom discussion.

CASE 8-4 The Lleyton Hewitt Credit Card

Exploratory Research on the In January 2002, Hewitt agreed to be featured on a new
Visa credit card offered by the National Australia Bank.
Lleyton Hewitt National Visa Card With the Lleyton Hewitt National Visa Card, the bank
expected to capitalize not only on the popularity of this
The Player
young player but also on the popularity of Australia’s
Lleyton Hewitt, a top-class tennis player from Australia,
premier tennis event, the Australian Open. One of the
stunned the world by defeating the reigning champion
salient features of the card was a low introductory
Pete Sampras to win the U.S. Open in 2001.
interest rate of 6.9 percent p.a for the first six months.
His inherent talent was obvious when he beat his
Furthermore, cardholders could choose between the
older and more experienced opponents at the tender
Standard National Visa Card and the Gold National
age of 8. He won his first professional title in 1998
Visa Card.
when he was 17 years old. He decided to discontinue
The extensive market research conducted by the
his studies to pursue a full-time career in tennis. His
bank prior to the release of the credit card revealed a
victories, over top-seeded players such as Patrick
strong demand for such a product. The research also
Rafter, Pete Sampras, Gustavo Kuerten, Alex Corretja,
indicated that the association of Lleyton Hewitt with
Magnus Norman, and many others during the Associa-
the card would increase customer acquisition, card
tion of Tennis Professionals (ATP) tour, established him
usage, and customer retention. Target customers were
as the number-one tennis player in the world.
short-listed based on the information available about
Unfortunately, however, Hewitt had to withdraw
their demographics and psychographics.
from the Hopman Cup in 2002 because he had chicken
The National Australia Bank, which over the pre-
pox. The 2002 Australian Open was his comeback
vious 18 months had aggressively pursued a strategy
tournament after his recovery, but he was defeated by
of offering innovative products, believed that the
Alberto Martin in the early rounds. He attributed his
Lleyton Hewitt National Visa Card was an example of
early loss to the fact that he was still recovering from
an innovative lifestyle product.
his illness and lacked energy.

Questions for Discussion

1. What types of demographic and psychographic 4. How would Hewitt’s age, lifestyle, personal inter-
information are required for this study? How ests, and personality relate to those of the card-
would you obtain it? holders? How would you design a marketing
2. Would the recent poor performance of Lleyton research study to identify the demographic char-
Hewitt affect the attitude of prospective and cur- acteristics of the prospective cardholders and iden-
rent credit card holders of the bank? How would tify the future customer group?
the company carry out marketing research to study
this issue? This case was prepared by the authors with inputs
3. Design the focus-group study and develop some from “Lleyton Hewitt Serves up a Winner for the
key questions that the interviewers can use to National,” press release, http://www.nab.com.au/
elicit the level of demand for the credit card. wps/wcm/connect/nab/nab/home/about_us/
How would the demand for the credit card be 8/5/21/1/2, January 10, 2002.
forecasted?

35
CASE 8-5 The research in Europe involved focus groups
Hamilton Beach Conducts Primary with the participants being asked to look at and touch
Research in Mexico and Europe the products. After the participants had an opportu-
nity to examine the products, they were asked to come
Hamilton Beach is well-known in the United States as back and talk about them in general, spontaneous
a maker of small kitchen appliances like blenders, terms. The discussion showed that European con-
toasters, and mixers. However, the brand is not so sumers were much more focused on design than
familiar in other countries. When the firm decided to American consumers. They seemed to like colors,
expand into Europe and Mexico with a new product rounded shapes, and good-looking appliances, espe-
line, they wanted to assess the brand awareness in cially those they plan to leave out on their kitchen
these markets. Based on the assumption that the counters. European consumers also did not appear to
Mexican consumer is slightly more prone to buying be as interested in product features. For example,
U.S. products, the firm wanted to confirm that there while an American consumer perceives an 18-speed
was better brand awareness in Mexico. blender as definitely added value, the European con-
A mixture of qualitative and quantitative research sumer seemed to perceive it as confusing and therefore
techniques were used in Mexico. Through the study, the as something negative.
firm was looking to determine what features were to be The research also highlighted the differences in how
included in the product and the retail environment Hamilton Beach product designers and consumers
through which they were going to sell. They also wanted define a product line. To the designers, uniformity of
to find out the acceptance level for the brand and whether things like the color of knobs on the appliances and the
the features of the product fit in well with consumer fonts used in the instructions make a group of products
needs. They found that the brand awareness was high in into a product line. But European consumers felt product
Mexico, and considering the proximity to the United attributes like color and shape defined a product line.
States and the similar taste preferences due to exposure Hamilton Beach decided to change the whole European
to the same types of products, they were optimistic in line to suit the consumer preferences and go back and
going ahead with the product launch. The initial results do the same kind of research, before launching the prod-
were promising and indicated success. Then Hamilton uct on a large scale.
Beach changed its focus to the European market.

Questions for Discussion

1. Do you think the focus group research conducted 2. As a market research analyst, is there an alternate
in Europe was representative of the population in way to design the research process in Europe to
terms of: address the issues?
■ Brand awareness and acceptance Source: Adapted with permission from
■ Desired product features Joseph Rydholm, “Seeking the Right Mix,”
■ Distribution channels November 2001, http://www.quirks.com/articles/a2001/
20011105.aspx?searchID=218469119&sort=9

36
CHAPTER 9—CASE

CASE 9-1 ■ What percentage of shoppers used unit pricing?

Essex Markets ■ With what frequency was unit pricing in use?
■ What types of shoppers used unit pricing?
Essex Markets was a chain of supermarkets in a medium-
sized California city. For six years it had provided its cus- ■ For what product classes was it used most frequently?
tomers with unit pricing of grocery products. The unit ■ Was it used to compare package sizes and brands or
prices were provided in the form of shelf tags that showed to evaluate store-controlled labels?
the price of the item and the unit price (the price per
ounce, for example). The program was costly. The tags had It was determined that a five-page questionnaire
to be prepared and updated. Further, because they tended completed by around 1,000 shoppers would be needed.
to become dislodged or moved, considerable effort was The questionnaire could be completed in the store in
required to make sure that they were current and in place. about 15 minutes, or the respondent could be asked to
A study was proposed to evaluate unit pricing. complete it at home and mail it in.
Among the research questions in the study were the
following: Source: Prepared by Bruce McElroy and
David A. Aaker as a basis for class discussion.
■ What percentage of shoppers was aware of unit
pricing?
Questions for Discussion

Specify how the respondents should be approached in and mailed in, or should some other strategy be
the store. Write out the exact introductory remarks that employed? If a self-administered questionnaire is used,
you would use. Should the interview be in the store, or write an introduction to it. What could be done to
should the questionnaire be self-administered at home encourage a high response rate?

CASE 9-2 2. You are a project director on a study funded by a

More Ethical Dilemmas in somewhat unpopular federal policing agency. The
study is on marijuana use among young people in a
Marketing Research community and its relationship, if any, to crime. You
will be using a structured questionnaire to gather data
The following scenarios are similar to those you saw in
for the agency on marijuana use and criminal activi-
Chapter 1, but bear directly on the rights of respon-
ties. You believe that if you reveal the name of the
dents in a research study. As before, your assignment
funding agency and/or the actual purposes of the
is to decide what action to take in each instance. Be pre-
study to respondents, you will seriously depress
pared to justify your decision.
response rates and thereby increase nonresponse bias.
1. Your company is supervising a study of restaurants What information would you disclose to
conducted for the Department of Corporate and Con- respondents?
sumer Affairs. The data, which have already been 3. You are employed by a market research company.
collected, included specific buying information and A manufacturer of female clothing has retained
prices paid. Respondent organizations have been your firm to conduct a study for them. The manu-
promised confidentiality. The ministry demands facturer wants you to know something about how
that all responses be identified by business name. women choose clothing, such as blouses and
Their rationale is that they plan to repeat the study sweaters. The manufacturer wants to conduct group
and wish to limit sampling error by returning to the interviews, supplemented by a session which
same respondents. Open bidding requires that the would be devoted to observing the women trying
government maintain control of the sample. on clothing, in order to discover which types of gar-
What action would you take? ments are chosen first, how thoroughly they touch
37
 and examine the clothing, and whether they look questionnaires on a mail survey. Although the
for and read a label or price tag. The client suggests accompanying letter refers to a confidential survey,
that the observations be performed unobtrusively the project director needs to be able to identify
by female observers at a local department store, via respondents to permit adequate cross-tabulation of
a one-way mirror. One of your associates argues the data and to save on postage costs if a second
that this would constitute an invasion of privacy. mailing is required.
What action would you take? What action would you take?
4. You are the market research director in a manu-
facturing company. The project director requests Source: Provided with the permission of Professor
permission to use ultraviolet ink in precoding Charles Weinberg, University of British Columbia.

CHAPTER 10—CASE

CASE 10-1 themes should be used in the advertising of the new

Roland Development Corp. models. Another problem was to identify those seg-
ments of the market with the highest probability of
Roland Development was a leading builder of homes purchasing the new models. The company asked the
in the western United States. Its emphasis was on con- YKG Group, a large national research firm, to submit
dominiums and ownhouses, which were forecast to a written proposal for research which would provide
have an attractive future in these markets. These hous- Roland’s management with information useful in
ing types lent themselves to standardization and cost- solving these two problems. Their proposal is sum-
reduction possibilities. Further, rising land costs were marized below.
causing the share of single-family detached houses Research Proposal
to decline significantly. Meanwhile, the share of market The recommended research design would use a con-
for single-family attached houses (houses with common sumer panel and employ both telephone interviews
walls, floors, or roofs) was expected to double in the and mail questionnaires. The research firm felt that the
next five years. Roland was well positioned to exploit needed information could be obtained only from that
these trends by following a strategy that differed from very small proportion of the population who might
competition in three areas: buy such a home. Each of several different market seg-
ments would be studied to determine how they posi-
■ Market segmentation. Roland typically segmented tioned the new models in relation to competing homes
the market more finely than other home builders, already on the market. The likelihood of purchasing a
and then designed homes to meet the specific needs Roland model would also be determined during the
of these groups. study for each of the three market segments and also
■ Direct selling. Shoppers in some department stores for each of several different advertising themes. This
could find full-scale, fully furnished Roland homes information would help Roland identify the most
on display. promising market segments for the new models, as
■ Low prices for a complete housing package well as the creative advertising strategy that would
(including all the furnishings and necessary most appeal to them.
financing). The proposed research design consisted of three
The company had begun to expand its limited phases: (1) The members of a large consumer mail
line of condominiums and townhouses to provide panel would be screened to locate qualified prospects
design and square-footage combinations that would for the new models; (2) a relatively small sample of
appeal to higher-income households. The manage- qualified prospects would be interviewed “in depth”
ment was especially pleased with the elegance, con- to identify possible advertising themes; and (3) a
venience, and durability of the four new models they large sample of qualified respondents would be sur-
were planning to launch. Several problems remained veyed by mail to test their response to alternative cre-
to be solved. The first was the identification of a cre- ative strategies.
ative strategy that would position the new models and Phase 1. The YKG Group maintained a bank of over
attract the largest number of purchases. That is, the 200,000 families who agreed to cooperate in research proj-
company wanted to know what main ideas and ects undertaken by the firm. Considerable information

38
existed about each family, including geographic location, responses and were told that it was very important to
occupation and age of male and female heads of family, do so because none of the responses would be tabulated
total family income, presence and age of children, and so or analyzed statistically. Responses to the open questions
on. Roland managers felt that the four new models would then be studied to identify four or five ideas of
would most likely appeal to middle- and upper-income themes that might be considered for use as creative
families of size two, three, or four, with a house-hold strategies in advertising the new models.
head 30 years of age or over. For this reason, the first Phase 3. This phase would be undertaken after four
phase of the proposed research involved mailing a short of the best advertising themes had been identified.
questionnaire to all panel members with those character- Some 2,400 families would be selected from the list of
istics. The questionnaire asked panel members to indicate prospects obtained from Phase 1—approximately 800
the likelihood of their purchasing a home in the next two “very good” prospects, 800 “good” prospects, and 800
to three years and also to report their attitude toward “fair” prospects.
buying a townhouse or condominium. All of the families in each of the three market seg-
It was expected that this screening process would ments would be sent pictures, line drawings, and
locate some 3,000 to 5,000 families who would be specifications (including prices) of the new Roland
prospects to buy the new models over the next few models as well as those of major competing models,
years. To be considered a prospect, a family had to all identified by brand name. Each of these three
report being likely to purchase a home in the next two groups of prospects would then be randomly divided
to three years, as well as having a favorable attitude into four subsamples of 200, each of which would
toward a condominium or townhouse. Among these receive one, and only one, of the four advertising
prospects, three market segments would be identified. themes identified for the new models. Thus, the study
A high-income family would be a “very good” prospect design would consist of three samples of 800 families
if it was “very likely” to buy a home; a medium-income each. In turn, each sample would be broken into four
family would be a “good” prospect if it was “very subsamples, each of which would receive a different
likely” to buy a new home; and a high-income family advertising theme.
would be a “fair” prospect if it was “somewhat” likely Analysis. The effect of each advertising theme on
to buy a new home. All other responses were consid- each prospect segment would be evaluated on three
ered to indicate nonprospects. measures: the degree to which it (1) resulted in the
Phase 2. In this phase about 200 qualified new line being rated as “most appealing,” (2) led
prospects would be interviewed using a combination respondents to request further information about the
of telephone and mail. These families would be company’s products, and (3) led respondents to indi-
mailed pictures, specifications, and line drawings of cate that they would be most likely to select one of
the company’s new models of condos and town- the company’s homes if they were to make such a
houses, although they would not be identified by the purchase in the near future. For each advertising
Roland name. The line drawings would include front theme-prospect segment combination the research
and rear views of each unit’s exterior as well as would yield three percentages. For example, for
sketches of each room. The specifications would theme #1 and the “very good” prospects, the research
include the number of square feet, wall thickness, might show that 38 percent of the respondents found
heating and cooling equipment capacities, appliance a model in the new line “most appealing” among all
brands and models, slab thickness, type of roof cov- the models reviewed; that 26 percent requested fur-
ering, and other features. ther information about the Roland models; and that
After reviewing these materials, respondents’ 17 percent indicated that they “most likely would
reactions and impressions would be obtained through purchase” one of the new Roland models. By com-
telephone interviews using open-ended questions. Inter- paring these three percentages for each advertising
viewers would be told that the objective was to obtain theme-prospect segment combination, it would be
qualitative data useful for ascertaining how potential possible to identify the most promising combinations.
buyers perceived the new models with respect to These results could be weighed by the relative size of
appearance, comfort, elegance, convenience, durability, each prospect segment to decide which creative strat-
ease and economy of maintenance, and other criteria. egy would be most effective in generating sales inter-
Interviewers would be instructed to record verbatim est in the new models.

Questions for Discussion

1. Would you recommend that Roland accept the 3. If the proposal is not accepted, what alternative
YKG Group proposal? designs should be considered?
2. If yes, what conclusions can be drawn from the
data in Phase 3 of the research?
39
CHAPTER 11—CASE

CASE 11-1
National Kitchens
For several years the management of National The questionnaire obtained information on micro-
Kitchens, a diversified packaged-foods manufacturer, wave usage. Two key questions addressed the issue of
had been watching the rapid growth in sales of ready-to-eat soup in glass directly:
microwave ovens. They were particularly interested in 15. Would you purchase ready-to-eat soup in a single-
the prospects for ready-to-eat soup in glass jars. The serving container (approximately 10 ounces) that
attraction of glass packaging was that the soup could could be put directly into your microwave oven
be heated in a microwave oven in its original container. and poured into a bowl after heating? Assume the
However, a single-serving, ready-to-eat soup in a glass same price per serving as canned soup.
jar was expected to cost $1.10 as compared to $0.90 for
 Yes About how many individual servings per
a comparable canned soup. While the price premium
month? ____________________________________
for glass was thought to be excessive, there were some
 No Why not? ______________________________
new data on the acceptability of this price premium
that had just been provided by a glass manufacturer. 16. Please review question 15 and indicate below
whether or not you would be willing to pay 20 cents
The Research Study more per individual serving for the product.
The glass manufacturer had designed a brief question-
naire to evaluate consumer attitudes to glass packaging  Yes
for a variety of microwave-oven cooking jobs. This  No
questionnaire was mailed to 600 names obtained from Of the 600 questionnaires, 312 were returned. The
the warranty cards returned to one microwave oven responses to questions 15 and 16 that related to soup
manufacturer. The results had just been tabulated and in glass are summarized in Table 11-4.
were being shown to National Kitchens.

TABLE 11-4
Summary of Question Responses

Number of Q. 15: No. of Q. 16: No. responding that they would

servings per month responses pay 20 cents more per serving

0 (“No”) 103 185 ⫽ would not pay 20 cents more

2 12 7
3 5 3
4 26 19
5 9 6
6–10 31 14
11–15 19 9
16–20 56 38
21–30 11 9
31–40 17 8
41–50 14 10
50⫹ 1 1

Questions for Discussion

1. What have you learned about the potential market 3. How else would you assess people’s attitudes
for soup in glass jars? toward this concept?
2. What else would you like to know?
40
CHAPTER 12—CASE

CASE 12-1 cigarettes. Whatever the reason, wine was being chosen
Wine Horizons more frequently as a beverage alternative to beer and
liquor in various formal and informal social situations.
Wine Horizons was a medium-sized New York State It was also believed that champagne was not sharing
winery that emphasized sparkling wines. The company in wine’s growth because of the difficulty in keeping
was not known to the public as a producer of good- champagne fresh after the bottle was opened—a large,
quality domestic champagne because all of their output opened bottle of champagne would lose all its carbon-
was sold to well-known hotels and restaurants, which ation in a few hours and “go flat.”
put their own labels on the bottles. However, their still Two wineries had recently begun test-marketing
(nonsparkling) wines were sold under the Wine Hori- wine in small packages. One winery was offering
zons label and were moderately well known. chablis, rosé, and burgundy in six-packs of cans, with
The management of the company had been each can containing six ounces of wine. Another win-
planning for some time to launch a line of champagnes ery was test-marketing chablis in six-packs of 6.5-ounce
under their own brand name. They were seriously con- bottles. The new packaging seemed to be selling rea-
sidering whether the launch should be based on a pack- sonably well in test areas, and retailers reportedly had
aging innovation. The specific proposal was to package a favorable attitude toward the new packaging. Com-
their champagne in six-packs of 7-ounce bottles in an pared with “single” small bottles or cans of wine—
easy-to-carry container, at a retail price of approxi- which were considered a nuisance—retailers felt that
mately $9.00. The 7-ounce quantity was chosen because the six-packs were more profitable and more conven-
it was the equivalent of two average-sized champagne ient to stack and display.
glasses, thus making one bottle a convenient serving
for one or two people. This size and price were expected The Research Study
to make the champagne an attractive alternative to The objectives of the study were to (1) measure con-
imported beers in a variety of social situations. sumers’ acceptance of wine in six-packs, (2) identify the
Before a decision could be made, the management type of person who was a potential purchaser and
team had to be satisfied that there was an adequate user of champagne in six-packs, (3) determine where in
market for the new packaging. They also wanted to the store he or she would expect to find such cham-
know the occasions during which the target market pagne, and (4) determine the size of the potential mar-
would be likely to use the product, and whether these ket. The sample would be champagne drinkers who
people would expect to find it in the imported beer or were 21 years of age or older. Also, the research would
wine section of their retail outlet. To answer these ques- be limited to markets where the six-packs of wine were
tions, the firm Ritchey and Associates was retained to already being tested. It was further decided that the
conduct a market study. A meeting to review their atti- data would be collected with personal interviews using
tude questionnaire was just beginning. a shopping mall intercept method. This would permit
the interviewer to show a picture of the proposed six-
Developments in the Wine Industry pack and to use cards to list answer categories in com-
The wine industry had enjoyed significant growth in plex questions. Only malls that contained liquor stores
recent years. The growth of white wines had been espe- would be selected. The interviewers would be located
cially strong, but sparkling wines had also experienced in the vicinity of the liquor store and would attempt to
an upward trend. Champagne sales had grown, but interview adults leaving the stores.
less than sparkling wines in general. The reason for the A six-part questionnaire (see Marketing Research
increased popularity of white wines was not known, in Action 12-5) was designed to obtain the desired
but many in the industry believed it was due to a gen- information. The major issues to be resolved were
eral trend toward “lightness” on the part of consumers, whether this questionnaire and the mall intercept
as reflected in their increased use of light beers, light design would identify potential users and yield a valid
wine, bottled mineral water, health foods, and low-tar estimate of the potential market for the six-packs.

Questions for Discussion

1. Will the proposed questionnaire and research 2. What alternative questions could be used to assess
design achieve the research objectives? attitudes and intentions-to-buy? Which approach
would yield the most valid responses?
41
 MARKETING RESEARCH IN ACTION 12-5

Hello! My name is ______ . I’m an interviewer with the marketing research firm of Ritchey and Associ-
ates, and we are conducting a study concerned with certain alcoholic beverages. Would you please
take a few minutes to answer some questions? I assure you that your answers will be kept completely
confidential.

1. Are you 21 years of age or older? (ASK ONLY IF NECESSARY)

______ Yes ______ No (TERMINATE)
2. Do you drink any alcoholic beverages?
______ Yes ______ No (TERMINATE)
3. What different kinds of alcoholic beverages do you drink?
______ Beer ______ Liquor (any kind)
______ Wine ______ Other
______ Champagne (to Q5)
4. Do you drink champagne?
______ Yes ______ No (TERMINATE)
5. About how often do you drink champagne? (CLARIFY RESPONSE IF NECESSARY)
______ Once a week or more often ______ About once in 2–3 months
______ About twice a month ______ About twice a year
______ About once a month ______ About once a year
______ DK
6. On what types of occasions do you drink champagne?
______ Dinner for two ______ Picnics
______ Small dinner party ______ After athletic activities
______ Parties ______ Just relaxing
______ Special holidays ______ Other (specify) ______
______ Dinner
7. Do you consider champagne to be an appropriate beverage to serve at informal occasions, or is it
only for formal occasions?
______ Appropriate for informal occasions
______ Only for formal occasions ______ For both occasions
EXPLAIN: I’m now going to ask you some questions about wine, not champagne. These are questions
about some new packaging that has recently been used by some brands of wine.
8. Are you aware that some wine is now being sold in packages consisting of six small cans and bot-
tles, each containing about 6 ounces?
______ Yes ______ No (to Q10) ______ DK (to Q10)
9. Have you ever purchased wine sold in such packaging or drank wine from one of these small con-
tainers?
______ Purchased ______ Both
______ Drank ______ Neither
10. Do you think it’s a good idea to sell wine in packages consisting of six small cans or bottles—that
is, are you in favor of it?
______ A good idea, in favor of ______ Indifferent (to Q12)
______ Not a good idea ______ Undecided (to Q12)
11. Why?
EXPLAIN: Wine Horizons is one of the largest private-label bottlers of champagnes in the United States.
For example, it supplies well-known hotel chains and restaurants with their own brand of
champagne. Wine Horizons is planning to market this package (SHOW PICTURE) of six small
bottles of champagne.
12. Do you think it’s a good idea to sell champagne in packages consisting of six small bottles—that is,
are you in favor of it?
______ A good idea, in favor of (to Q14) ______ Indifferent (to Q14)
______ Not a good idea ______ Undecided (to Q14)
13. Why not?
14. Would you consider purchasing such a package of champagne at the retail price of $9.00?
______ Yes (to Q16) ______ No
______ Maybe, possibly (to Q16) ______ DK

42
MARKETING RESEARCH IN ACTION 12-5 (continued)

15. Why not?

16. For what kinds of occasions would you use these small bottles of champagne?
______ Dinner for two ______ Picnics
______ Small dinner party ______ After athletic activities
______ Parties ______ Just relaxing
______ Special holidays ______ Other (specify) ______
______ Dinner
17. Would you use them for any of the occasions shown on this list? (SHOW CARD)
______ Dinner for two ______ Picnics
______ Small dinner party ______ After athletic activities
______ Parties ______ Just relaxing
______ Special holidays
______ Dinner
18. In what types of retail stores would you expect to find this product being sold?
______ Liquor stores ______ Other (specify) ______
______ Supermarkets
19. In what section of the store would you expect to find this package of champagne, that is, what other prod-
ucts would you expect to find alongside it?
______ Other champagnes ______ Beer
______ Wine ______ Other (specify) ______

CASE 12-2 fashions over the years, in favor of classic, lasting designs.
Smith’s Clothing (A) During the last 10 years a set of five or six aggressive, high-
fashion retailers had expanded into or within Bayview.
John Simpson, the head of Simpson Research, was attempt- Thus, despite the fact that the market for fine women’s
ing to design a marketing research study that would clothes had expanded enormously during the past decade,
address the research questions posed by Jim Andrews, the the competition had grown much more intense.
president of Smith’s Clothing, during their morning meet- Andrews was justifiably concerned about the per-
ing. The research questions seemed rather well defined: formance of his stores. Profits at five of the six stores had
fallen during each of the past four years. The sixth store
1. Which women’s clothing stores compete with Smith’s? had been opened only 18 months before and had not
2. What is the image of Smith’s, and how does this achieved its target growth rate. Although the chain was
image compare with that of its competitors? In other still profitable, if the existing trend continued it would
words, how is Smith’s positioned with respect to its soon be losing money.
competitors? This performance had stimulated Andrews to engage
3. Who is the Smith customer and how does she in serious reappraisal of the whole operation. In particu-
differ from that of Smith’s competitors? lar, he was reviewing the chain’s rather conservative pol-
Although no final judgment had been made, Andrews icy toward the product line, advertising, store decor, and
was leaning toward an in-home, self-administered ques- store personnel. He felt that it might be time to consider
tionnaire. He was not certain, however, whether a ques- stocking some trendy fashions and attempting to increase
tionnaire could be developed that would be responsive the store’s appeal to women in their teens and twenties.
to the research questions. The population of interest was A working hypothesis was that Smith’s had a higher
operationally defined to be those women whose family appeal relative to other stores to women over 40 and was
income exceeded the median income. Simpson’s imme- less attractive to younger women. He realized that any
diate task was to draft a questionnaire and to develop such move was risky in that it would jeopardize the exist-
a tentative sampling plan. ing customer franchise without any guarantee that new
Smith’s was a six-store chain of women’s clothing customers would compensate. Before making any such
stores located in Bayview, a large, growing city in the move he felt that it was critical to learn exactly how
southwestern United States. The chain had provided fine Smith’s was now positioned. He also felt that he needed
clothing for the upper class of Bayview for over 40 years. a much more reliable fix on the current Smith customers
Twenty years previously, Smith’s had opened its first sub- in terms of their age, the stores in which they shop, their
urban store. Having closed its downtown store 10 years preferences, and their purchase profile. With such infor-
ago, it now had five suburban stores and one in a nearby mation he would be in a much better position to identify
community of 60,000 people. Smith’s had avoided trendy alternatives and evaluate them.
43
Assignment

Develop a research design including:

1. The type of survey to be employed
2. A questionnaire

CASE 12-3 5. Have you noticed any odor problems? (Skip if cov-
Compact Lemon ered in question 4.)
Our client is considering a new product. The con-
Ben Johnson, a marketing research staff member, has cept involves a powerful lemon-scented cleaner in a
been asked to provide a quantitative estimate of the convenient spray container to be used to clean trash
demand for a new product concept, tentatively called compactors. This heavy-duty cleaner will clean more
Compact Lemon. The concept involves a powerful spray easily because it is in spray form, and it will provide
cleaner with a lemon scent to be used to clean trash the added benefit of a deodorizer.
compactors. The product will involve a heavy-duty 6. Which of the following would describe your likeli-
cleaner that will clean more easily than current com- hood to buy the product?
petitors, which are not in a spray form, and that will Would buy it
provide the added benefit of a deodorizer. Would very likely buy it
Johnson has a research proposal for a telephone Would not very likely buy it
survey—a national random sample of 600 homeowners Would not buy it
screened to be owners of compactors would be phoned 7. What is your reaction to this idea? (Probe—any
via a WATS line. Johnson wonders (1) whether the pro- other reactions?)
posed questionnaire will deliver the necessary infor- 8. How often do you use deodorizers in the home?
mation and (2) what improvements could be made. 9. How many people are living in your home?
10. What is your age?
Proposed Questionnaire for Telephone Survey 11. Do you have children under eight years old?
1. Do you own a compactor? 12. Which are you?
2. How often do you use your compactor? a. Home owner?
3. Is it satisfactory? b. Home renter?
4. Any problems? c. Apartment renter?

CASE 12-4 time whether to stay with the mail-back questionnaire

Project DATA: An Urban method or try some other, more costly, procedure. Not
to change would involve persuading the other members
Transportation Study of the research team that the problems encountered in
The Downtown Agency for Transportation Action proj- the pretest could be overcome and that the mail-back
ect (Project DATA) was a collaborative approach to the method would yield sufficiently accurate results.
problem of improving the high-density movement of
people and goods within downtown Cleveland.1 In Background
August 1996, the survey researcher employed by Project Downtown Cleveland represented one of the most
DATA was wondering how to collect downtown origin important concentrations of people in the Midwest. It
and destination (DOD) data for input to a comprehen- generally was defined as an area encircled by the
sive model of traveler behavior in downtown Cleveland. Cuyahoga River Valley, the Innerbelt Freeway, and
Problems had been compounded by a poor response rate Lake Erie. For the purposes of Project DATA, this
to a recent test of the preferred method of data collec- definition was modified slightly to include the down-
tion, a mail-back questionnaire distributed to rapid- town-oriented activity centers adjacent to the south-
transit users, bus patrons, and automobile travelers. east corner of the area outside the Innerbelt Freeway.
Consequently, the researcher had to decide in a short These centers include the future location of Cuyahoga

1
Funds and assistance for the project were provided by Case Western Reserve University, Battelle Memorial Institute, City of Cleveland, Cleveland-
Seven County Transportation-Land Use Study, Cleveland Transit System, Cuyahoga County, and U.S. Department of Housing and Urban Development.
44
Community College and the St. Vincent Hospital and 5. The time distribution of the people-movement pat-
its parking area. terns throughout a 24-hour period
There had been considerable progress in making
downtown Cleveland more accessible through rail rapid A number of alternative methods for collecting the
transit and freeways; however, facilities to expedite the DOD information were considered. These included
movement of people and goods within the downtown mail-back questionnaires distributed to people at key
area were being installed at a much slower rate. Trans- locations within the downtown area, personal inter-
portation planners had tended to treat downtown views conducted at these same key locations, telephone
Cleveland as a terminus point for regional line-haul surveys, trip diaries distributed to people to complete
transportation, yet the downtown covered a broad land over extended periods of time, mail-back question-
area with several separate activity centers and a solid naires sent to houses, personal home interviews, news-
network of business, commercial, and entertainment paper coupons to be completed and returned by mail,
facilities. Except for a downtown loop bus system, there and a system of distributing and collecting precoded
was little transportation among these centers. computer cards to reflect origins and destinations of
The lack of transportation was regarded as a con- trips within the downtown area.
tributing factor in the deterioration of downtown An evaluation of the various survey designs was
Cleveland and many other urban areas. After the made by the Project DATA staff. It decided that a mail-
Hough riots, Cleveland was chosen by the U.S. Depart- back questionnaire distributed at key locations within
ment of Transportation as the site of the first large- the downtown area was the most realistic approach to
scale effort to design a comprehensive central urban collecting the needed information, taking into account
transportation network. A number of systems were the time and financial constraints of the project. To test
under consideration, including: (1) train-type systems, this decision, a pilot survey was conducted. The objec-
(2) small automatic taxis, and (3) continuous systems. tives were:
Each was to be evaluated by a model that would sim-
ulate the decision processes of different user segments.
The model would consider where and how users move 1. To evaluate the ability of the survey forms and
from one place to another for various trip purposes questions to obtain the required data
within the downtown area. The DOD data being col- 2. To determine the approximate survey response rates
lected by Project DATA were to be the base for the that could be expected from the various categories
calibration of the simulation model. In addition, the of people so that a proper data sampling frame
data would be used in the development of interim could be formulated
projects to improve the existing downtown trans- 3. To ascertain where in the downtown area the survey
portation system. Thus, there was considerable questionnaires should be distributed
urgency behind the request for the data. 4. To determine the best procedures for distributing
the questionnaires to the users of various modes of
Designing the DOD Study transportation
The first step was to establish the purpose of the study.
After extensive discussions, it was agreed that the fol- The pilot survey utilized the questionnaire shown in
lowing types of information were needed: Figure 12-3. Four hundred were distributed to rapid-
transit users as they went through the turnstiles in
1. The numbers and socioeconomic characteristics of Terminal Tower. Another 600 were given to bus riders as
people who move to, from, and within downtown they passed an imaginary downtown cordon line. Those
Cleveland questionnaires were distributed only during the A.M. and
2. The locations of the activity centers within down- P.M. peak traffic periods. A final 400 questionnaires were
town Cleveland to which these people are moving distributed within two major parking lots by placing
3. The methods of travel used to move these people them under windshield wipers after the automobiles had
to, from, and within downtown been parked. The results of the pilot survey are summa-
4. The trip purposes of the people movements rized in Figures 12-4, 12-5, and 12-6.

Questions for Discussion

1. Critique the questionnaire. Does it provide the 3. Specify how you would improve this mail-back
required data? survey.
2. Evaluate the overall research design with respect 4. Suggest an alternative design and cite its advan-
to possible sources of bias in the results and the tages and shortcomings.
reasons for the poor response rate.
45
 1. Please list ALL trips you made downtown TODAY. We are especially interested in short walking trips such as: going to lunch,
coming from lunch, a walk from the parking lot to the office, etc.

Time Time Purpose Method of

Name of Place Where Trip Starts Trip Name of Place Where Trip Ends Trip of Trip Travel
and Address if Possible Starts and Address if Possible Ends (Please use codes below)

Trip TO the
downtown area

First Trip IN
downtown area

Second Trip in
downtown area

Third Trip

Fourth Trip

Fifth Trip

Sixth Trip

Trip FROM the

downtown area

b b
2. How many persons accompanied you downtown today? “Purpose of Trip” “Method of Travel”
How many of these persons were children under 12? 1. work 1. auto driver
2. personal business 2. auto passenger
3. How often do you usually come downtown? (Please Check One) 3. shopping 3. bus
1. Every Weekday (Mon–Fri)  4. social-recreation 4. rapid transit
2. Several Times a Week  5. school 5. taxi
3. Once a Week  6. eat 6. walk
4. Once a Month  7. medical or dental 7. other
5. Other (Please Specify) ____________ 8. serve passenger
9. to home
10. other
4. Name _________________________________________________________________________________________________________
Address _______________________________________________________________________________________________________
(Number) (Street) (City) (Zip)
________________________________________________________________________

5. Male Female  Number of Persons in Your Household? Your Age? No. of Autos in Household?
6. Approximate Family Yearly Income: (Please Check One)
Under $3,500 ; $3,500⫺6,500 ; $6,500⫺9,500 ; $9,500⫺12,500 ; $12,500⫺15,500 ; Over $15,500 
7. What could be done to make your trips within downtown Cleveland easier, faster, or more pleasant?
__________________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________________
8. We would appreciate any suggestions you may have for making this questionnaire clearer or easier to answer. For instance,
were any of the questions confusing? Why?
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________

FIGURE 12-3
Project DATA transportation questionnaire.

46
 Downtown
Agency for ER
IE
FR
ON
T

E KE
AK LA ORT
Transportation L K E
UR AI
R P

T
Project Data B

IN NE RB EL
University Circle Research Center
1000 Cedar Avenue
Cleveland Ohio 44106 Action
RT W
VIE

4
PO

E1
Project DATA ne e ds t o k now how peopl e travel to, from, and, M IE
IU ER
AD

E9
ST

CU
es pecially, w i t hi n do w nt o w n Cl evel and. “D ow ntow n” i s the op en YA
CSU
HO EUCLID
area in thi s ma p IC

GA
BL
PU SQ
Our goal i s a be t t e r t r a nsportati on system—i ncl udi ng i mproved

pedes tria n f a c i l i t i e s—f o r the dow ntow n. We w oul d appreci ate

y our as s ist a nc e i n c o mpl eti ng the questi ons on the other si d e

of this fo r m a c c o r di ng t o the i nstructi ons bel ow . THANK YO U.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
First Class
P ermit No. 2 0 8 6
Cleveland, Ohio

B U S I N E S S RE PL Y MAI L
No Postage Stamp Necessary if Mailed in the United States

Postage Will Be Paid By

Case Western Reserve University

Cleveland, Ohio 44106
University Circle

Attention: Dr. James B. Reswick, Project DATA

INSTRUCTIONS:

1. Please complete the questions on the other side of this form. Only a small number of these forms are

being distributed at this time. We need this information in order to design a large-scale survey

that will be conducted this summer and fall. Your cooperation will make a significant difference

to the project.

2. After completing the questionnaire, please fold it tightly along the dotted lines so that the address

in the center of the page above is showing.

3. Please drop it into any mailbox—no postage is required.

THANK YOU FOR PARTICIPATING IN PROJECT DATA

FIGURE 12-3 (continued)

47
 Number of Number of
Questionnaires Questionnaires
Mode Returned Handed Out Percentage Return

CTS Rapid Transit 20 (A.M.) 100 20

19 (P.M.) 100 19
Shaker Rapid Transit 23 (A.M.) 100 23
16 (P.M.) 100 16
CTS Bus Route 32 23 (A.M.) 100 23
(suburban express) 15 (P.M.) 100 15
CTS Bus Route 9 22 (A.M.) 100 22
(suburban local) 16 (P.M.) 100 16
CTS Bus Route 14 5 (A.M.) 100 5
(low-income inner-city 1 (P.M.) 100 1
area local)
Department Store 10 200 5
Parking Lot (relatively
high parking turnover
rate)
Muny Parking Lot 16 200 8
(caters primarily to all-
day parkers)
Totals 186 1,400

FIGURE 12-4
Distribution and response of pilot survey.

1. A common error for rapid transit respondents was that they failed to record Terminal Tower as their
first destination in the central business district (CBD).
2. A common error for all respondents was that they often failed to record return trips, especially the
return lunch trip.
3. It appears that a relatively large number of people (especially bus riders) do not leave the building they
work in during the day. Or, these people did not understand how to fill out the form.
4. The people that returned the questionnaire can be generally categorized into two major groups: (a)
those that completely understood how to fill out question 1, and (b) those that completely
misunderstood how to fill out question 1.
5. A few people recorded “work,” “restaurant,” and so on as their origin and destination points, rather
than an address or the specific name or the place or location.
6. Several people did not record the number of the home address; only street, city, and Zip Code.
7. A relatively large number of respondents failed to answer question 2.
8. For the majority of the respondents, filling in the trip purpose and method of travel codes presented no
problems. In fact, many people improvised on the questionnaire to provide additional data.
9. In a few instances people did not record trip times. Again, it appears that these cases were oversights.
Generally, people recorded this information accurately. For example, walking trips lasting two or three
minutes were being recorded. The longer the trip–usually the trips to and from the CBD—the more
tendency there was to round off the trip time to 15- or 30-minute intervals.
10. The majority of respondents filled out the income question with no comments. However, several people
residing in higher income areas questioned the necessity of the information in relation to
transportation. Eleven of the 180 respondents failed to answer this question.
11. There is some confusion on the income question. For example, there were many 20- and 21-year-olds
making over $15,000 annually, based on the result of the survey.
12. A few respondents (seven) did not record their age. (continued)

FIGURE 12-5
Analysis of problems by Project DATA staff.

48
 13. Public transportation respondents receiving the questionnaire on the outbound trip (P.M.) had a
tendency to record only that trip. In addition, the (P.M.) return rate of the questionnaire was
considerably less than the (A.M.) (inbound) trip.
14. Several bus-rider respondents obviously failed to record their first trip in the CBD between the bus stop
and their first CBD destination. In other cases, this error was difficult to identify, since it is unknown to
us how far it is from the bus stops to their first CBD destinations on Euclid Avenue. (Bus routes
surveyed were Euclid Avenue routes.)
15. Many bus respondents misunderstood question 2 and recorded the total number of people on the bus.
16. A surprisingly large number of people enter the CBD via one mode and exit using another mode.
17. Bus riders are very concerned about trips to and from the CBD and wonder why we are concerned with
only downtown transportation needs.

FIGURE 12-5 (continued)

1. Question #1 refers to “today,” while #3 refers to “usual” habits. I go downtown every day, but I do not always
drive. Also, times of leaving and arriving vary.
2. I think this questionnaire is easily followed.
3. Good questionnaire—easy to answer.
4. The first group of questions could be made more explicit.
5. They were confusing on many trips because I don’t do the same thing every day at lunch time.
6. Question #2.
7. Everything is clear.
8. Very good—not confusing.
9. If answers must be confined to the blocks, it might be well to point this out.
10. Questionnaire seems clear enough.
11. Not confusing.
12. Add a few more lines for #7 and place a line for the date.
13. Could not be made any clearer.
14. No provision of alternates—sometimes walk/bus; no space allowed for total trip home as buses connect-
ing with rapid for suburbs cannot be included in “downtown area” trips. I need two bus trips plus rapid
to get home.
15. Understand as is.
16. Question #4 is revelatory; you should ask for nearest intersection.
17. Question #2a could be reworded—glad you’re interested!
18. Question #2 doesn’t make it possible to answer if one has not made a bus trip and/or is unaware of sur-
vey. Question #7—why discuss only downtown? The trip to town is depressing.
19. All questions clear enough.
20. No clearcut place for occasional trips.
21. It was difficult for me to answer Question #1.
22. It is fine.
23. Clarify Question #1 and #2—add extra part to “from downtown area” for intermediate trip, e.g., Terminal-
Windemere-home (one trip or two?)
24. Home address—why necessary?
25. Use of “grid” and block number instead of address would make the form easier and more meaningful.
26. The questionnaire was very simple to fill out. I hope you get as many back as you gave out.
27. My family does not reside in Cleveland, therefore, perhaps question #6 is irrelevant.
28. You didn’t provide for combined bus and rapid or car and rapid use.
(continued)

FIGURE 12-6
Survey criticisms by respondents (unedited responses to Question 8).
49
29. No confusion.
30. Questionnaire was clear.
31. Upper right-hand corner should have more blocks for more than one method of travel or purpose of trip.
32. Method of travel does not indicate if more than one method is used; i.e., bus, transfer to rapid, transfer
to bus again, or walk.
33. Provide a way of indicating more than one method of travel for the same trip, such as transfers to and
from a bus or rapid transit.
34. Why worry about short walking trips? Alleviate the problems of getting into and out of the downtown area
from the suburban residential sections.
35. I should like to know the purpose of this questionnaire and whether something constructive will come of
it. I think the questionnaire is clear—I hope useful.
36. Believe inquiry as to whether or not service from home to downtown was frequent enough at hour nec-
essary to leave would be pertinent.
37. Referring back to Question #1—List trips within downtown area for a 30-day period giving people more of
an opportunity to use “Purpose of Trip” and “Method of Travel.”
38. Much more time could be spent in the organization of this questionnaire.
39. What does the yearly family income have to do with the transportation problem?
40. Very specific and clear.
41. Why income of family?
42. Not confusing, but embarrassing and totally unnecessary, i.e., why the question of sex (male and female)
necessary? Also, why the interest about incomes? Or if a person is alone or how many in the household?
These, to me, seem totally irrelevant questions.
43. I found the questionnaire clear enough.
44. It seems a much better questionnaire than the usual.
45. Perfectly clear.
46. No distinction between going to work and business calls during day.
47. Method of travel and purpose should indicate that more than one answer is okay. Also more space for
multiple answers.
48. Complication where two travel modes are used—see Question #1 “Trip”—definition not immediately clear.
49. Design a way to emphasize that you are only interested in a certain part of downtown.
50. Question #7 might be worded as below to eliminate unwanted responses. This may, however, confuse your
strictly ambulatory respondents. (Question #7 reworded: What could be done to our transportation system to
make your trips within downtown Cleveland easier, faster, and more pleasant?)
51. Extremely amateurish from a professional standpoint–too detailed, too time-consuming, too personal
(address, identify with income).
52. Question #4 is not necessary.
53. Question #1 doesn’t indicate whether you mean total trip or first or second leg–to my office is two steps.
54. It would seem easier to ask approximately how long a trip took than the times. I never pay much atten-
tion to timing my trips by the clock—especially shopping.
55. Questions were all clear.
56. Good questionnaire—okay.

FIGURE 12-6 (continued)

50
CHAPTER 13—CASE

CASE 13-1
Evaluating Experimental sample and 513 for the after sample. Among the
Designs questions were

A description of a variety of experimental designs fol- ■ List the companies you consider to be the
lows. For each design: (1) indicate the type of experi- leading manufacturers of the following prod-
ment that is being used, (2) briefly discuss the threats ucts.
to internal and external validity and identify those you ■ Check the one manufacturer (for each product)
regard as the most serious, and (3) describe how you that you would first consider when purchasing
would improve the design to overcome the problems the item.
you have identified. The results showed
1. In the Bayer deceptive advertising case an issue Before After
was whether people were influenced by some
Bayer advertisements to believe that Bayer was Percentage aware of 23 46
more effective than other aspirins in relieving National Chemical
pain. In an experiment designed to address that Percentage prefer 8 11
issue, a Bayer print advertisement was shown to National Chemical
428 people projectable to the U.S. adult popula-
tion, and two television advertisements were
shown to 240 people recruited from local organi- The results were averaged across the major prod-
zations (which received $1.00 for each participant) ucts carried by National Chemical.
in nine communities in Massachusetts, Missouri, 3. An account executive notices that a client is spon-
and Georgia. After being exposed to the adver- soring a program that will be shown on about
tisements, respondents were asked to identify the three-fourths of the network’s station lineup. This
main points of the advertisement, what the adver- provides a possibility for testing the effectiveness of
tisement meant by its major claim, and whether the new commercials being used. The executive’s
the advertisement suggested that Bayer is more letter to the research supervisor reads, in part: “What
effective at relieving pain than any other brand if we picked several markets that will receive the
of aspirin. The percentage of respondents were program and several that won’t? Then within each
tabulated who, in response to the open-ended of these we can measure attitudes and purchasing
questions, said (1) that Bayer is best and (2) that among a randomly selected group of consumers.
Bayer is better than other aspirins. Whether the After the broadcast we can interview other ran-
respondents made explicit reference to effective- domly selected groups on the same questions.”
ness also was noted. These percentages were used 4. A manufacturer of products sold in food stores
to address the issue. For example, across all wished to find out whether a coupon good for
surveys it was found that 10 percent felt that a 10 cents off the purchase price of its product could
main point of the advertisement was that Bayer is win new users. Coupons were mailed to half the
best or better than other aspirins in effectiveness. households in the city’s upper-80-percent income
Also across all surveys, 71 percent felt that the groups. Ten days before mailing, phone interviews
advertisement suggested that Bayer works better were conducted with 200 randomly selected
than any other aspirin. households scheduled to receive the coupon and
2. In 1982, the instrument group of National Chem- 200 randomly selected who would not receive it.
ical decided to change from a modest advertis- Whoever answered the phone was questioned
ing effort aimed at generating leads for its sales about brand awareness and past purchasing
force to a more substantial program aimed at within the product category. One month later,
increased awareness and preference. A major callbacks were made to 400 households. Of the
vehicle for this campaign was Chemical Process original group, 165 coupon receivers and 160 non-
Instrumentation, a leading trade magazine. To receivers were asked the awareness and purchase
evaluate the advertising, a survey was made of questions again. In addition, 100 coupon recipients
the readers of that magazine before and after the and 100 nonrecipients who were not previously
one-year campaign. In each case a systematic questioned were interviewed on this occasion. The
sample of 2,500 readers was sent questionnaires. latter also were picked randomly from the receiver
Responses were obtained from 572 for the before and nonreceiver populations.
51
CASE 13-2 might somehow introduce error. There was something a bit
Barrie Food Corporation sloppy about the methodology. I did not warm up to the
idea, the more I thought about it, that the viewer was going
Al Blankenship (of Carter-Wallace) has just given an to get a free sample merely by a telephone call. This was
enthusiastic account of a new technique for evalu- not real life. I was afraid that the free offer bit would result
ating television commercials. Your boss—the marketing in such a high level of response that it would be impossi-
research manager for a large food manufacturer— ble to differentiate between commercials.
who is in the audience with you, wants you to analyze Several weeks later it hit me. What we needed was
the technique carefully and make a recommendation on an easy method of controlling audience size and who
the use of the technique. The transcript of Blanken- received the special offer, and a way to make the viewer pay
ship’s remarks follows: at least something for his [or her] product. Couponing,
properly designed, could provide the solution.
Jim stopped in my office one day early this year, burst- A simple method was devised, and pretesting was con-
ing with an idea he had to test the effectiveness of ducted on the couponing aspects to make sure that the price
television commercials. He told me that in fall, 1976, level was right. The entire test procedure required four
WCAU-TV had telecast a program which discussed the steps: a screening telephone call, a coupon mailout, a tele-
pros and cons of the proposed roofed-over sports stadium phone postcall, and measurement of coupon redemption.
for the city. Viewers were asked to telephone their reac- The precall is made within a stated time period in
tions to a special number to indicate whether they were advance of the television show that is to carry the test
in favor of or opposed to the sports palace. Jim and his advertising. The respondent is asked about his or her
group had been assigned the job of keeping a running viewing plans for the forthcoming period. The last brand
total of the vote. purchased of each of several product groups is asked
He had become intrigued, he said, that this sort of about. The product group for the brand of the test com-
approach might be used to measure the effectiveness of mercial is included.
television commercials. In a balanced experiment, you Immediately following screening, each person stat-
could have an announcer, immediately following the test ing that he or she intended to watch the test vehicle is
commercial, ask people to telephone in to request a sam- sent a special coupon, good for the product advertised at
ple of the product. Differences in rate of response a special, low price. This coupon is sent in the manufac-
between different commercials would measure their turer’s envelope, and so far as the recipient knows, has no
effectiveness. connection with the survey. This is not a store coupon.
My reaction was immediate and positive. This was To be redeemed, it must be sent to the manufacturer.
really getting close to a behavioral measurement of However, it is made as easy as possible to redeem. A
response to advertising. But it lacked a crucial control. postage-paid return envelope is included, and all the
How could you be sure that the same number of people recipient must do is insert the proper coins in a card pre-
had been exposed to each commercial? The technique pared for this purpose, which includes his name and
required a measurement of the size of audience exposed to address. The coupon has an expiration date of one week
each test commercial. from date of mailing, to prevent responses that are mean-
In this situation, I thought of C. E. Hooper, since ingless trickling in over a long time period. The proce-
one of Hooper’s specialties is measurement of audience dure makes it possible to consider coupon responses only
size. If audience size could be built in as a control, it from those who viewed the program, which is crucial.
seemed to me that the technique was solid. I got Jim The day following the telecast, a call is made to each
together with Bruce McEwen, Executive Vice President person who has said that he or she expected to view the
of Hooper. Bruce was just as excited as I had been. particular program. The only purpose of the call is to
However, following our discussion, I began to cool off. determine whether the person has actually viewed the
I was afraid that the audience size measurement made the particular show. No question about advertising or about
whole thing too cumbersome, and that the cumbersomeness brands is asked.

52
CHAPTER 14—CASE

CASE 14-1 estimated that the cost of interviewing and inter-

Exercises in Sample Design preting the interview will be roughly $75.00 per
respondent.
In each of the following situations, make recommen- 3. A small Caribbean island relies heavily on tourist
dations as to the type of sample to be used, the method income. There is a need to develop a study so that
of selecting the sample, and the sample size. an estimate can be provided each month as to
a. The number of tourists
1. The manager of the appliance department of a local b. The length of stay
full-line department store chain is planning a major c. Their activities
one-day nonprice promotion of food processors, d. Their attitudes toward some programs and
supported by heavy advertising in the two local activities
newspapers. The manager asks you to recommend The plan is to conduct a short interview with each
a method of sampling customers coming into the respondent and to leave with them a short ques-
department. The purpose is to assess the extent to tionnaire to be completed and mailed after return-
which customers were drawn by the special adver- ing home.
tisement, and the extent to which the advertisement Several sampling plans are being considered.
influenced their intentions to buy. A pretest of the One is to generate a random sample of hotel rooms
questionnaire indicates that it will take about and to interview each occupant. Another involves
3 minutes to administer. The manager is especially sampling every nth person that passes a predeter-
interested in learning whether there are significant mined point in the city. Still another is to sample
differences in the response to the questionnaire departing planes and ships. About six planes and
among (a) males versus females, (b) gift buyers ver- three ships depart each day. Design a sampling
sus other buyers, and (c) age groups. plan so that each month 500 tourists are obtained
2. A major airline wants to run a preliminary study on in the sample.
the attitudes of university students toward air 4. A sample of homeowners in the state of Illinois is
travel. The company’s research director already has desired for a major segmentation study conducted by
submitted an interview plan and has estimated that, a large financial institution. A lengthy personal inter-
on average, each interview will require between an view lasting over 1 hour will be conducted with each
hour and an hour-and-a-half to administer. It is respondent. A sample size of 3,000 is targeted.

CASE 14-2 1. To determine the characteristics of Enhance users

versus competitors by such factors as age, income,
Talbot Razor Products Company
occupation, marital status, family size, education,
social class, and leisure-time activities.
One of the products marketed by Talbot Razor Prod-
2. To determine the image of the Enhance brand ver-
ucts Company is an after-shave lotion called Enhance.
sus competitors on such attributes as masculinity,
This brand is sold through drugstores, supermarkets,
expensiveness, and user stereotypes (such as
and department stores. Sales exceed $30 million per
young men, factory workers, young executives,
year but are barely profitable because of advertising
and men living in small towns).
expenses that exceed $9 million. For some time the
3. To discover the meaning to consumers of certain
company and its advertising agency have felt the need
words that were used to describe after-shave
to undertake a study to obtain more data on the char-
lotions.
acteristics of their users as contrasted to those of other
4. To examine the media habits of users by television
leading brands. Both the company and the agency
programs, magazines, and newspapers.
believe that such information would help them find
better ways to promote the Enhance brand. In discussing the sampling universe, the advertis-
Preliminary discussions between the advertising ing manager thought the study results should be bro-
department and the research department of the ken down by heavy versus light users of Enhance. In
advertising agency resulted in the following study the manager’s opinion, as few as 15 to 20 percent of the
objectives. users might account for 60 percent of the total purchases.
53
It was not clear how many containers a user would with between 40,000 and 50,000 respondents. The
have to buy during a specified time period to qualify research director indicated that this size sample would
as a heavy or a light user. The research director and the permit breakdown of the results for the United States
advertising manager disagreed on a definition of user: by heavy versus light users.
The research director thought that anyone who had The advertising manager, who did not think this
used the Enhance product within the past year should would be an adequate national sample, said:
qualify as a user and therefore be included in the study,
while the advertising manager thought that a user I can’t present these results to my management
should be defined as one who had purchased the prod- and tell them that they are representative of the
uct within the past three months. In fact, the advertis- whole country, and I doubt if the sample in each
ing manager went on to say, “I am really interested of the 10 to 15 metropolitan areas is big enough to
only in those people who say that the Enhance brand enable us to draw reliable conclusions about our
is their favorite brand or the brand that they purchase customers and noncustomers in that particular
more than any other.” area. I don’t see how you can sample each metro-
After much discussion about what constituted or politan area on an equal basis. I would think that
should constitute a user, the research director pointed the bigger areas such as New York and Chicago
out that the advertising manager was being unrealistic should have bigger samples than some of the
about the whole sampling problem. A pilot study was smaller metropolitan areas.
conducted to determine how many qualified users
could be obtained out of every 100 persons interviewed The research director explained that this way of
in Sacramento, California. While the findings were not allocating the sample between areas was not correct
completely representative, they did provide a crude since the size of the universe had no effect on the size
estimate of the sampling problem and the costs that of the sample. According to the director:
would result from using any kind of a probability
sample. The research director said: If we do it the way you are suggesting, it will mean
that in some of the big metropolitan areas we’ll end
In the Sacramento study we were interested only in up with 150 to 200 interviews, while in some of the
finding out how many males 18 years of age or smaller ones, we’ll have only 50 or 75 interviews.
older used after-shave, what brands they had pur- Under such conditions it would be impossible to
chased during the past year and the past three break out the findings of each metropolitan area sep-
months, and what brand they bought most fre- arately. If we sample each area equally, we can weigh
quently. All interviewing took place during the the results obtained from the different metropolitan
evening hours and the weekend. The findings areas so as to get accurate U.S. totals.
revealed that only about 70 percent of the male
respondents were at home when the interviewer When the discussion turned to costs, the advertis-
made the call. Of those who were home and who ing manager complained:
agreed to cooperate, only 65 percent were users of
after-shave: that is, affirmatively answered the I can’t possibly tell my management that we have
question: “Do you ever use after-shave?” Of those to make 40,000 to 50,000 calls in order to get
who used after-shave, only 7 percent had purchased 2,000 to 3,000 interviews. They’re going to tell me
the Enhance brand within the past three months, that we’re wasting an awful lot of money just to
while 15 percent reported having purchased it find users. Why can’t we find Enhance users by
within the past year. The costs of the Sacramento selecting a sample of drugstores and offering
job figured out to about $6.00 per contact includ- druggists some money for getting names and
ing the not-at-homes, refusals, and completed inter- addresses of those men who buy after-shave? We
views, all as contacts. The sample size for the could probably locate Enhance users for maybe 35
Sacramento pilot study was 212 male respondents, to 50 cents each.
and the field costs were $1,272. These costs will be The research director admitted that this would
increased substantially if the sample includes be a much cheaper way, but pointed out that it is
smaller towns and farm interviews. not known what kind of sample would result, and
therefore it would be impossible to tell anything at all
The research director believed that the best sam- about the reliability of the survey. The advertising man-
ple size they could hope for would be one that pro- ager thought management would provide no more than
vided about 100 interviews with Enhance users plus $30,000 for the study. The research director estimated
100 interviews with users of other brands in each of 10 that the results could be tabulated, analyzed, a report
to 15 metropolitan areas. This would provide a total written, and the results presented to management for
sample size of 2,000 to 3,000 and would require contacts about $7,000, thus leaving around $23,000 for fieldwork.
54
 Questions for Discussion

1. How should the sampling universe be defined? 3. How should the sample be distributed geograph-
2. How large a sample should be collected? ically?

CHAPTER 15—CASE

Cases for Part II

Data Collection

CASE II-1 As she started to review the marketing research

Currency Concepts effort of Information Resources, Inc., she wondered
what she would be able to recommend to the Execu-
International1 tive Planning Committee the next day regarding the
currency exchange project. She liked her recommenda-
Dr. Karen Anderson, Manager of Planning for Century
tions to be backed by solid evidence, and she looked
Bank of Los Angeles, settled down for an unexpected
forward to reviewing results of the research performed
evening of work in her small beach apartment. It
to date.
seemed that every research project Century had com-
missioned in the last year had been completed during
her 10-day trip to Taiwan. She had brought three Activities of Information
research reports home that evening to try to catch up Resources, Inc.
before meeting with the bank’s Executive Planning Personnel of Information Resources, Inc., had decided to
Committee the next day. follow three different approaches in investigating the
Possibly because the currency exchange facilities problem presented to them: (1) review secondary statis-
had been closed at the Taiwan Airport when she first tical data; (2) interview companies that currently engage
arrived, Dr. Anderson’s attention turned first to a in currency exchange; and (3) conduct an exploratory
report on a project currently under consideration by consumer survey of a convenience sample.
one of Century Bank’s wholly owned subsidiaries,
Currency Concepts International (CCI). The project Secondary Data. The review of secondary data had
concerned the manufacture and installation of currency three objectives:
exchange automatic teller machines (ATMs) in major
foreign airports. 1. To determine whether the number of persons fly-
CCI had been responsible for the development of ing abroad constitutes a market potentially large
Century Bank’s very popular ATM (“money machine”), enough to merit automated currency exchange
now installed in numerous branches of the bank, as well 2. To isolate any trends in the numbers of people fly-
as in its main location in downtown Los Angeles. The ing abroad
current project was a small part of CCI and Century 3. To determine whether the amount of money that these
Bank’s plan to expand electronic banking services travelers spend abroad is sizeable enough to provide
worldwide. a potential market for automated currency exchange

1
This case is printed with permission of the author, Grady D. Bruce of the California State University, Fullerton.

55
 The U.S. Department of Transportation monitors MARKETING RESEARCH IN
the number of people traveling from U.S. airports to ACTION II-1
foreign airports. These statistics are maintained and
categorized as follows: citizen and noncitizen passen- American Citizens Flying Abroad
gers, and civilian and military passengers. Since this in 2001 to Major Foreign
study was concerned only with Americans who travel Ports of Entry
abroad, only citizen categories were considered.
Number of Travelers
Furthermore, since American military flights do not uti- Region/Country (in thousands)
lize the same foreign airport facilities as civilian pas-
senger flights, the military category was also excluded. Mexico 17,153
The prospect that non-Americans might also use these Canada 15,561
facilities causes the statistics to be somewhat conserva- Europe 11,438
tive. The figures for 2001 were summed for each for- Caribbean 4,141
eign airport; the results by geographic area are shown South America 2,247
Central America 1,414
in Marketing Research in Action II-1. The top 10 gate-
Africa 505
way countries from all American ports are shown in
Middle East 1,010
Marketing Research in Action II-2. Asia 4,318
The second objective, to determine any growth Oceania 1,187
trends in air travel, was addressed by studying the
number of Americans flying abroad in the last five SOURCE: U.S. Department of Commerce, International Trade Administration, Office
of Travel and Tourism Industries, January 2003.
years. Marketing Research in Action II-3 shows the
number of American travelers flying to various geo-
graphic areas and the associated growth rates in each
of those areas. Europe clearly has the greatest number Information Resources, Inc., concluded, therefore,
of travelers. Generally, the growth rates in overseas air that Europe holds the greatest market potential for the
travel have been negative since 2000 due to the slow- new system. As Dick Knowlton, coordinator of the
ing economy and terrorist attacks. research team, said, “Not only are all of the statistics
In order to address the third objective, whether the for Europe high, but the short geographic distances
amount of money spent by American travelers abroad between countries can be expected to provide a good
constitutes a potential market, per-capita spending was deal of intra-area travel.”
examined. Marketing Research in Action II-4 shows per-
capita spending, by geographic area, for 1997–2001 as Company Interviews. In an attempt to better under-
well as yearly percentages of growth. These figures indi- stand the current operations of currency exchange in
cate that Americans are spending increasing amounts of airports, four major firms engaged in these activities
money abroad; even when inflation is taken into consid- were contacted. While some firms were naturally
eration, these figures are positive. reluctant to provide information on some areas of their

MARKETING RESEARCH IN ACTION II-2

Most Frequented Foreign Countries of Entry

from All American Ports in 2000 and 2001

2000 Travelers 2001 Travelers

Country (in thousands) Percent Change (in thousands)

Mexico 18,849 ⫺9% 17,153

Canada 15,188 2% 15,561
U.K. 4,189 ⫺19% 3,383
France 2,927 ⫺10% 2,626
Italy 2,148 ⫺10% 1,944
Germany 2,309 ⫺18% 1,894
Dominican 779 72% 1,338
Republic
Jamaica 886 48% 1,313
Japan 1,262 ⫺16% 1,060
Spain 1,262 ⫺20% 1,010

SOURCE: U.S Department of Commerce, International Trade Administration, Office of Travel and Tourism
Industries, January 2003.
56
MARKETING RESEARCH IN ACTION II-3

Growth in Numbers of U.S. Citizens Flying Abroad

1997–2001 (in thousands)

Percent Percent Percent Percent

Change Change Change Change
Regions 1997 1997–1998 1998 1998–1999 1999 1999–2000 2000–2001 2000–2001 2001

Europe 10,099.50 8.90% 10,995.40 6.10% 11,665.80 12% 13,121.67 ⫺7% 12,137.83
Caribbean 4,108.10 1.50% 4,170.40 8.70% 4,533.50 3% 4,681.87 ⫺5% 4,432.90
Asia 3,399.60 1.80% 3,459.50 5.10% 3,635.60 10% 4,000.62 ⫺5% 3,819.87
South
America 1,681.50 8.50% 1,824.20 ⫺0.60% 1,812.80 4% 1,879.96 0% 1,873.43
Central
America 1,104.00 19.90% 1,323.80 10.80% 1,466.80 10% 1,606.71 0% 1,601.55
Oceania 613.5 8.80% 667.6 22.00% 814.6 9% 885.9 ⫺8% 816.79
Middle East 449.8 ⫺3.90% 432.2 2.90% 444.9 0% 446.59 ⫺25% 334.55
Africa 177.9 10.30% 196.2 4.50% 205 12% 230.04 1% 232.12

Total
overseas 21,633.90 6.60% 23,069.20 6.50% 24,579.10 9% 26,853.35 ⫺6% 25,249.03

Mexico 4,333.50 2.50% 4,442.60 7.80% 4,788.60 4% 4,992.49 ⫺2% 4,909.34

Canada 3,192.40 13.50% 3,622.80 5.10% 3,806.70 2% 3,871.89 ⫺3% 3,767.08

Grand total 29,159.80 6.80% 31,134.60 6.60% 33,174.40 ⫺3% 32,123.15 5% 33,625.45

SOURCE: U.S. Department of Commerce, International Trade Administration, Office of Travel and Tourism Industries.

operations, several were quite cooperative. These firms, American Express, Bank of America, and Citibank, as
and a number of knowledgeable individuals whose well as Deak-Perera, are engaged in airport currency
names surfaced in initial interviews, provided the exchange in a variety of foreign locations. Approval of
information that follows. permits to engage in airport currency exchange activity
In both New York and Los Angeles, there is only one rests with the municipal body that governs the airport,
bank engaged in airport currency exchange: Deak-Perera. and is highly controlled. It appears that foreign currency

MARKETING RESEARCH IN ACTION II-4

Per-Capita Spending by Americans Traveling Abroad

1997–2001 (US$)

Percent Percent Percent Percent

Region 1997 Change 1998 Change 1999 Change 2000 Change 2001

Europe 63 15% 73 3% 75 2% 76.6 2% 78

Latin America 30 85% 56 6% 59 1% 59.6 1% 60
South and
Central America - - 41 3% 43 2% 43.7 2% 45
Asia and Pacific - - 42 3% 44 0% 43.6 0% 43
Overseas total 142 12% 158 6% 167 0% 167.0 0% 167
Canada 17 17% 20 7% 22 3% 22.4 3% 23
Mexico 23 ⫺1% 23 ⫺9% 21 8% 22.2 7% 24
Total 182 10% 201 5% 210 1% 211.6 1% 214

SOURCE: U.S. Department of Commerce, International Trade Administration, Office of Travel and Tourism Industries, January 2003.
57
exchange is a highly profitable venture. Banks make most exchange theme. The interviews were conducted prima-
of their profits on the spread in exchange rates, which are rily in the arrival/departure lobbies of international car-
posted daily. riers and spanned over four weeks. A deliberate attempt
Both Citibank and Bank of America indicated that was made to include as many arriving as departing
they attempt to ensure their facilities’ availability to all passengers to neutralize the effect of increasing holiday
flights. The more profitable flights were found to be traffic. Additionally, to reduce interviewer bias, three dif-
those that were regularly scheduled, rather than char- ferent interviewers were used. Interviews were intention-
tered. The person more likely to use the facilities was ally kept informal. And Dick Knowlton cautioned the
the vacationer rather than the businessperson. Neither interviewers to remain objective and “not let your excite-
bank could give an exact figure for the average trans- ment over the product concept spill over into the inter-
action size; estimates ranged from $85 to $100. view and bias the responses.”
It was the opinion of bank/Deak employees, who The interviews were divided almost evenly
dealt with travelers on a daily basis, that the average between those who favored the concept and those who
traveler was somewhat uncomfortable changing money did not. Those who did perceive value in the concept
in a foreign country. They also believed it to be particu- tended also to support other innovations such as the
larly helpful if clerks at the exchange counter converse automated teller machine and charging foreign cur-
with travelers in their own language. A number of years rency on credit cards. Those who would not use the
ago Deak attempted to use a type of vending machine to currency exchange terminals wanted more human
dispense money at Kennedy Airport. This venture failed; interaction and generally did not favor automation in
industry observers felt that the absence of human con- any form; a fair proportion also had had previous prob-
versation and assurance contributed to its lack of success. lems exchanging foreign currency. However, even those
Most of the exchanges performed the same types who did not favor the currency exchange idea did seem
of services, including the sale of foreign currency and to prefer the system of having 24-hour availability of
the sale of travelers checks. The actual brand of travel- the machines, and of using credit cards to get cash
ers checks sold varies with the vendors. under emergency situations.
American Express has recently placed automated The respondents represent a diverse group of indi-
unmanned travelers check dispensers in various viduals ranging in age from 18 to 80 years, holding such
American airports. This service is available to American different positions as oil executive, photographer, house-
Express card holders and the only charge is 1 percent wife, and customs officer. Primarily bound for Europe,
of the face value of the purchased checks; the purchase Canada, and Mexico, the interviewees were mainly split
is charged directly to the customer’s checking account. between pleasure-seekers and those on business. Only
As yet, the machines have not enjoyed a great deal of three individuals interviewed were part of tour groups,
use, although American Express has been successful in and of these three, only one had previously traveled
enrolling its customers as potential users. abroad. The majority of the others had been out of the
Methods of payment for currency purchases are United States before and had exchanged currency in at
similar at all exchanges. Accepted forms of payment least one other country. Many had exchanged currency
include: actual cash, travelers checks, cashier checks in remote parts of the world, including Morocco, Brazil,
drawn on local banks, and MasterCard or Visa cards. Australia, Japan, Tanzania, and Russia. Only five indi-
When using a credit card to pay for currency pur- viduals had not exchanged money in airports at one
chases, there is a service charge added to the cus- time or another. The majority had obtained foreign cur-
tomer’s bill, as with any cash advance. rency in airports and exchanged money in airports, pri-
marily in small denominations for use in taxi cab fares,
Traveler Interviews. To supplement and complement the bus fares, phones, and airport gift shops, as well as for
statistical foundation gained by reviewing secondary data food, tips, and drinks. Most respondents agreed a prime
sources, the consumer interview portion of the study was motive for exchanging money in airports was the secu-
designed to elicit qualitative information about travelers’ rity of having local currency.
feelings toward current and future forms of exchanging Exchanging currency can become a trying ordeal for
currency. Approximately 60 American travelers were some individuals. They fear being cheated on the
interviewed at both the San Francisco and Los Angeles exchange rate; they cannot convert the foreign currency
International Airports, due to the accessibility of these into tangible concepts (for example, “how many yen
locations to Information Resources’ sole location. An should a loaf of bread cost?”); they dislike lines and asso-
unstructured, undisguised questionnaire was developed ciated red tape; and many cannot understand the rates
to assist in channeling the interview toward specific top- as posted in percentages. Most individuals exchange
ics (see Appendix A). Questions were not fixed and the money in airports, hotels, or banks, but sometimes there
question order was dependent on the respondent’s are no convenient facilities at all for exchanging currency.
answers. Basically, the guide served to force the interview People like to deal with well-known bank branches,
conversation around the central foreign currency especially in airports, because they feel more confident

58
about the rate they are receiving. However, major fears normal airport currency exchange routine, while the
of individuals are that money exchange personnel will same number would have nothing to do with the
not understand English and that they will be cheated in machines. However, the majority of potential users
the transaction. Furthermore, a few people mentioned qualified their use by such features as competitive rates,
poor documentation when they exchange currency in knowing the precise charges, or knowing they could get
foreign airports. help if something went wrong. Individuals who indi-
The travelers were divided as to whether they cated no preference were included in the favorable cat-
exchange currency before or after they arrive in the for- egory, simply because they would not refuse to try the
eign country, but a few said that the decision depended machine. Most of the indifferent people seemed to indi-
on what country they were entering. If a currency, such cate they would try such a machine if some type of
as English pounds, could easily be obtained from a introductory promotional offer was included, such as
local bank before leaving the United States, they were travel information, currency tips, or a better rate.
more likely to exchange before leaving. However, in no With virtual unanimity, the respondents felt that
case would the traveler arrange for currency beyond a 24-hour availability made the currency exchange
week in advance. Most preferred to obtain the foreign machines more attractive, yet that alone would not per-
currency on relatively short notice—less than three suade the dissenters to use the terminals. Some indi-
days before the trip. Of the individuals on tours, none viduals felt that a machine simply could not give the
planned to obtain currency in the foreign airport. travel advice that could be obtained at the currency
Apparently, the tour guide had previously arranged for exchange booths.
the necessary transportation from the airport to the The opportunity to charge foreign currency against
hotels, and there would be only enough time to gather a major credit card, such as MasterCard or Visa, was a
one’s luggage and find the bus before it would depart, definite plus in the minds of most respondents. One
leaving no time to enjoy the facilities of the airport that individual clearly resented the idea, however, feeling
required foreign currency. All three tour individuals that he would “overspend” if given such a convenient
did mention that they planned to obtain foreign cur- way to obtain cash. Respondents offered a number of
rency once they arrived at the hotel. All individuals suggestions concerning implementations of the product
mentioned that they had secured their own foreign cur- concept and a number of specific product features:
rency, but a few of the wives who were traveling with
their husbands conceded that their spouses usually 1. Add information about the country.
converted the currency in the foreign airport. 2. Provide small denominations, and include coins.
Very few of the interviewees had actually used an 3. Have it communicate in English.
automated teller machine, but the majority had heard 4. Put in travelers checks to get cash.
of or seen the teller machines on television. Those who 5. Put in cash to get foreign currency.
had used the automated machines preferred their con- 6. Post rates daily.
venience and were generally satisfied with the termi- 7. Keep rates competitive and post charges.
nal’s performance. Many of those who had not used the 8. Have television screen with person to describe
automated teller machines mistrusted the machine and procedure.
possible loss of control over their finances. Concerns 9. Place the machines in hotels and banks.
about security and problems with the machines break- 10. Have a change machine nearby that can convert
ing down were also expressed. One woman described paper money.
the teller machines as being “convenient, but cold.” 11. Place machine near existing currency exchange
Apparently, many people prefer having human inter- facilities for convenience when normal lines be-
action when their money is concerned. come long.
As noted earlier, approximately 30 of the respon- 12. Demonstrate how to use the machine.
dents would favor the exchange terminals over their 13. Use all bank credit cards.

59
CHAPTER 17—CASE

CASE 17-1 selected from a universe of 93 homes. The sampling plan

Medical Systems Associates: was designed to insure representativeness along the fol-
lowing dimensions:
Measuring Patient Satisfaction1
1. Type of ownership (individual, partnership, cor-
Between 1975 and 1994, per-capita consumer expendi- porate, nonprofit)
tures for nursing home services grew at a faster rate 2. Level of care (skilled, limited, personal)
than any other health-service category. During this 3. Type of assistance approval (Medicare and
period serious doubts were raised as to the quality of Medical Assistance, Medical Assistance only, and
nursing-home care and service. These concerns were no assistance)
confirmed by the U.S. Department of Health, Education 4. Size (small—less than 100 patients; medium—100
and Welfare (HEW) investigation in 1996 that led to to 200 patients; and large—more than 200 patients)
substantial adverse publicity. Ray Baxter, of Medical
In order to maintain approximate proportionate
Systems Associates (MSA), felt that most of the prob-
representativeness of the sample with the universe, the
lems stemmed from the “product orientation” of the
number of patients randomly selected from each sample-
nursing homes; that is, they were “more concerned
member nursing home was based on the size of the home.
with selling the services and facilities they had than
Prior to the contact of respondents by the field
with providing a service mix designed to satisfy the
interviewers, telephone calls or visits were made to the
needs and wants of the patients.” A study grant was
administrators of each nursing home in the sample,
received from HEW to test this broad proposition, and
eliciting their cooperation. In general, administrators
in particular (1) to study the process by which patients
proved to be highly cooperative.
chose nursing homes and (2) to identify the determi-
In contacting respondents, the interviewer was
nants of patient satisfaction. In early 1997 Baxter had
provided with a prearranged random sampling proce-
completed the fieldwork and was wondering what
dure, which he or she was instructed to follow. Upon
he could conclude about the latter objective from the
completion of the basic interview, the interviewer
relationships he had observed in the data.
requested that the respondent sign two “release forms”
permitting the researchers subsequently to obtain
Study Design financial data and to discuss medical details with the
The primary vehicle for data collection was a 12-page respondent’s doctor.
personal interview questionnaire containing more than
200 variables. The questionnaire was generally divided Analysis
into six major conceptual areas as follows: The issue of the measurement of patient satisfaction
and identification of determining variables was com-
1. Socioeconomics
plicated by the special nature of the respondents. As
2. Lifestyle measures (past and present)
Baxter noted, “Very few persons not in nursing homes
3. Attitudes, interests, and opinions
want to be in a nursing home. And how satisfied are
4. Nursing-home selection process
people with nursing homes when they have given up
5. Evaluation of nursing-home environment
an established lifestyle because they now need services
6. Perceived health
they would prefer not to need? Most persons, in and
Questionnaire development required considerable out of nursing homes, would opt for good health and
trial and revision. Questions had to be worded to be com- independence. Because a nursing home represents an
patible with low educational levels because the median undesired portion of a life cycle, the problem, then, is
school grade attained by patients was under eight years. to measure the satisfaction level of people who are, in
Five-point rating scales did not work, because the respon- an important sense, dissatisfied.”
dents rejected the supplied category descriptions and sub- Three approaches were used to measure “condi-
stituted broader descriptions of favorable, neutral, and tional satisfaction,” as it was termed. One was the
negative. Standard projective techniques did not work acceptance of the necessity of entering a nursing home.
well, apparently because many of the respondents were The second was their adjustment to the disruption
highly introspective. of established routines. The third was the patients’
The final questionnaire was administered in late direct evaluation of their physical (medical), attitudinal,
1996 to a stratified random sample of 122 patients in and environmental satisfaction. Each of the elements
16 nursing homes in Wisconsin. These homes were in the evaluation measure was represented by a separate

60
 TABLE 17-4
Cross-Classification Results: Environmental Rating Index
versus Selected Variablesa

Environmental Rating Index

Variable Low Medium High

Nursing home religious affiliation

Church-supported 15.8% 34.1% 45.9%
Nonsectarian 84.2 65.9 54.1
100.0 100.0 100.0
Sample size (19) (41) (61)

“Have you made any new friends here?”

Yes 84.2 71.8 96.7
No 15.8 28.2 3.3
100.0 100.0 100.0
Sample size (18) (39) (60)

Number of friends
“Just a couple” 31.2 21.4 5.1
“Just a few” 31.2 14.3 20.3
“Quite a few” 37.6 64.3 74.6
100.0 100.0 100.0
Sample size (16) (28) (59)
a
All variables are associated with the ERI at a level of .05 or greater using the x2 test of significance.

index, based on combinations of responses to various The focus of the initial analysis was on the determi-
questions, as follows: nants of the Environmental Rating Index (ERI). Cross-
classification analyses with chi-square tests of significance
1. An Environmental Rating Index (ERI) was based on
were run for combinations of many variables with the
answers to 14 questions involving satisfaction with
ERI. Only three of the variables showed any statistical
such aspects of the nursing home as room size,
significance. (These variables, and the strength of the
physical layout, staff courtesy, medical care, cleanli-
relationships, are summarized in Table 17-4.)
ness of facilities, food preparation, and so forth.
None of the other variables, such as the modernity
2. A Psychological Adjustment Index was based on a
of the home, size of the home, reasons for being in the
series of attitudinal questions involving such issues
nursing home, selection process, or patient mobility,
as perceived self-usefulness, self-perceived level of
were found to be significantly associated with the ERI.
activity, perceived lifestyle change, self-perceived
As Ray Baxter reviewed these results, he was wonder-
reaction of others to nursing-home patients, per-
ing what conclusions he could draw, and whether other
ceived difficulty in adjusting to nursing-home life
analyses would be required to examine the basic
(upon arrival), desire to relocate, and so on.
“product orientation” hypothesis with the ERI.
3. A Physical Well-Being Validity Index was based on
a comparison of patients’ self-perceived level of
health with that indicated by medical records.

Question for Discussion

1. How can you help Ray Baxter develop some impli-

cations based on the analyses?

61
CHAPTER 18—CASE

CASE 18-1 The next step in the research study was to attempt
American Conservatory Theater to identify characteristics of the continual, gradual, and
sudden subscriber groups that might be of use in under-
standing the segment differences and as inputs in the
The American Conservatory Theater (ACT), a major reper-
development of audience building and retention pro-
tory theater located in San Francisco, was completing its
grams. Five variables appeared to be useful in this regard:
tenth season. The management team at ACT decided to
conduct a major research study, intended to help their 1. Years resident in the San Francisco Bay Area, mea-
planning effort. A questionnaire was developed and sured on a scale ranging from 1 ⫽ two years or less
mailed to their approximately 9,000 season subscribers. A to 5 ⫽ more than 20 years.
return rate of 40 percent was obtained. A sample of 982 of 2. Age of subscriber, measured on a scale ranging from
these returned questionnaires was selected for analysis. 1 ⫽ 25 years old or less to 5 ⫽ more than 65 years old.
One of the major interests of ACT management 3. Household income, measured on a scale ranging
was in developing an understanding of the dynamics from 1 ⫽ $15,000 per year or less to 4 ⫽ more than
of the process whereby individuals became ACT sub- $50,000 per year.
scribers. To assist in this process the sample was 4. Whether the subscriber spent more than 20 hours
divided into four groups according to their behavior a week watching TV, measured as a dummy vari-
pattern over the past five seasons: able: 1 if yes, 0 if no.
1. Continual subscribers (32 percent)—subscribed all 5. Attendance at six other cultural institutions (that
10 seasons is, ballet, Civic Light Opera, DeYoung Museum,
2. Gradual subscribers (31 percent)—one or more Museum of Modern Art, opera, and symphony) in
seasons of attendance followed by becoming a San Francisco. The attendance score is the number
subscriber of the six different activities that the respondent
3. Sudden subscribers (21 percent)—became a sub- attended at least once in the previous year.
scriber without attending prior performances Table 18-5 shows the differences between the mean
4. Miscellaneous patterns (16 percent) scores for the three groups for these five variables.
The existence of a substantial “sudden subscriber” group Each respondent was asked which two benefits from
was surprising and ran counter to conventional belief a list of eight were the best reasons for purchasing a sub-
among theater managers that people were first enticed scription. One of the benefits listed was the subscription
to attend a few performances at a particular theater and price discount (ACT offered subscribers seven plays for
only after they had had some positive experiences with the price of six). The percentage of each subscriber group
this theater would they become subscribers. that mentioned each benefit is shown in Table 18-6.

TABLE 18-5
Subscriber Groups

Mean Scores

Continual Gradual Sudden

Years resident (1 to 5 scale)a 4.32 3.68 3.53

Age (1 to 5 scale)a 3.34 2.74 2.86
Income (1 to 4 scale) 2.54 2.39 2.38
Cultural activities (0 to 6 scale)a 2.84 2.95 2.08
Twenty hours of TV (0 to 1 dummy variable) 0.31 0.26 0.38
Sample size 314 304 206
a
Indicates that the differences between means are significant at the .01 level.

62
 TABLE 18-6
Benefits Obtained by Subscribing to ACT

Benefita

More New
Ease of Price Priority Discount Certain Play Support
Subscriber Ordering Guaranteed Discount Seating on Special to Attend Series for Art Total
Group (%) Ticket (%) (%) (%) Plays (%) (%) (%) (%) Mentions

Continual subscriber 7.5 16.4 12.4 22.0 1.1 25.9 2.9 11.8 549
Gradual subscriber 8.2 16.5 12.5 22.2 1.1 28.5 3.0 7.9 558
Sudden subscriber 11.0 13.9 10.4 25.7 1.6 30.7 1.6 5.1 374
Total sample 8.6 15.8 12.0 23.0 1.2 28.1 2.6 8.6 1,481
a
Each respondent could check a maximum of two benefits. Percentages are based on total number of benefits checked.

63
Questions for Discussion

1. Does it surprise you that there are so many 2. What does Table 18-6 say about the difference
“sudden subscribers”? Why would a person sub- between the three groups? What are the other
scribe (at a cost that could be as high as $50 per implications of Table 18-6 for ACT?
person) instead of first trying it out? After review-
ing Table 18-5, in what aspects would you say that Prepared by Adrian B. Ryans, Charles B. Weinberg,
such a person differed from other subscribers? and David A. Aaker as a basis for class discussion.
Interpret the footnote in Table 18-5.

into four groups of two stores for the experimental

CASE 18-2
treatment, as summarized in Table 18-7.
Apple Appliance Stores Stores sales were measured during the six-month
period after the experiment started. Sales also were
An experiment using a randomized design was con- determined during the same period in the previous
ducted by the Apple Appliance chain of 300 retail year. The difference between the sales during the two
stores. Four levels of advertising provided the experi- periods was the variable of interest. A plot of the sales
mental treatment: none, low, medium, and high. In change is shown in Figure 18-7.
addition, the stores were divided by store size into In Table 18-8, an analysis of variance is shown.
small, intermediate, and large. A random sample of Exactly what statistical questions are answered by the
eight stores was taken from each of the three store-size table? What additional, unanswered questions may be
groups. Each set of eight stores was divided randomly of interest?

TABLE 18-7
Research Design

Store Size

Small Medium Large Total

None 2 2 2 6
Low 2 2 2 6
Advertising level Medium 2 2 2 6
High 2 2 2 6
Total 8 8 8

Large stores
Medium stores
Sales change

Small stores

0 Low Medium High

Level of advertising
FIGURE 18-7
Effect of advertising on sales.
64
 TABLE 18-8
Analysis of Variance of Sales Changes

Sum of Degrees of Mean Sum

Source of Variation Squares Freedom (df) of Squares F-ratio

Advertising 360 3 120 3.0a

Store size 88 2 44 1.1
Interaction 984 6 164 4.1b
Unexplained variation 480 12 40
Total 1,912 23
a
Significant at the .10 level.
b
Significant at the .05 level.

Cases for Part III

Data Analysis

CASE III-I Armed with the computer data from a recent audi-
ence survey completed January 6, 1987 (four weeks ear-
The Vancouver lier), the three knew that they had to sift through all the
Symphony Orchestra1 information very carefully. Within two weeks, they had
Daniel Gardiner and Charles Weinberg to come up with a set of specific and actionable recom-
mendations. The VSO’s Board had already voted to
At an afternoon meeting at the Vancouver Symphony cancel many concerts in June so as to lower its deficit.
Orchestra (VSO) offices, three executives, concerned with All three agreed that perhaps their immediate task
the marketing of the VSO, were discussing some of the was to build ticket sales for the remaining four months
challenges they currently faced.2 of the 1986/87 season. The guest artist and concert
schedule from February through June is shown in
Ed Oscapella: We’ve got to do something, and Marketing Research in Action III-1. During this time
do it fast, to get out of this diffi- period, two subscription series were offered. The first
cult situation. Time is running was a six-concert “Seagram Pops” series. The second
out of the 1987/88 season. was a five-concert celebration series. In the prior year, a
Jane Corbett: From my point of view, I’ve got to “Musically Speaking” series and “Jubilee” series were
find out who wants what: Do sub- both offered.
scribers want something different
than nonsubscribers? If so, what? Background
We’ve got all this information that Situated midway between Asia Pacific countries and
needs analyzing and I’m hoping it the United Kingdom and approximately 40 miles
will be useful in marketing the north of the United States, Vancouver is Canada’s
1987/88 season. third largest city. Home to more than 1.3 million peo-
E. Douglas Hughes: I’ve got to decide on an appropri- ple, Vancouver is the largest metropolitan area in West-
ate theme or themes to communi- ern Canada and is an emerging center of international
cate to the segment(s) we go after. trade and investment.
We’ve got to give the printers Vancouver is rated one of the five most beautiful
sufficient lead time to get our cities in the world, and in addition to varied recre-
brochures out, so I need to know ational and sports attractions, Vancouver has many cul-
what to focus on in the promotion. tural and theatrical attractions as well. These include

1
Ed Oscapella, Executive Director; Jane Corbett, Director of Marketing; and E. Douglas Hughes, Director of Communications for the Vancouver
Symphony Orchestra.
2
The data for this case are available; see your instructor.

65
MARKETING RESEARCH IN ACTION III-1

VSO Guest Artist and Concert Schedule

February–June 1987

Date Series Conductora Soloist

Feb. 7, 9 CS#1 R. Barshai I. Kipnis, harpsichord

Feb. 13 Recital V. Ashkenazy, piano
Feb. 15, 16, 17 J#8 R. Barshai C-L Lin, violin
Feb. 19, 20, 21(2) Bal #2 P. N. Balet
Vanc-Cantata Singers
Feb. 24(2) School P. McCoppin K. Rudolph, pic., E. Volpe, hp.
Feb. 27, 28, Mar. 2, 3 POP#2 S. Dankworth No soloists
Mar. 8, 9, 10 J#9 H. Holliger Cond & ob soloist
Mar. 12 Recital M. Perahia, piano
Mar. 14, 16 CS#2 G. Sebastion B. Tuckwell, hn
Mar. 18 Benefit Concert M. J. Fox, T. Banks, B. Zarankin, piano/
E. Northcott
Mar. 19, 20, 21(2) Bal #3 E. Stafford Royal Winnipeg Ballet
Mar. 24 SP Bal P. McCoppin R. Nureyev and Friends
Mar. 29, 30, 31 J#10 Y. P. Tortelier W. Klien, piano
April 3, 4, 6, 7 POP#3 R. Hayman The Cambridge Buskers
April 6 Tea & Trumpets P. McCoppin E. Northcott, sop, O. Lowry, host
April 12, 13, 14 J#11 K. Akiyama L. Lortie, piano
April 18, 20 CS#3 T. Otaka A. de Larrocha, piano
April 21 SP P. McCoppin Visions: Mission Andromeda
B. Buckley
Apr. 24, 25, 27, 28 POP#4 M. Miller No soloists
May 3, 4, 5 J#12 R. Barshai Bach Choir: J. Coop, piano: M. Collins, sop;
S. Graham, mezzo; G. Evans, tnr;
D. Garrard, bass
May 9, 11 CS#4 R. Barshai E. Mathis, sop
May 22, 23, 25, 26 POP#5 J. Everly and Bach Choir S. Woods, sop/M. Paris, mezzo D. Eisler,
tnr/B Hubbard, bari
May 30, June 1 CS#5 K. Akiyama C. Parkening, guitar-May 30
Norbert Kraaft, guitar-June 1
May 31 F. Pops#3 P. McCoppin Jarvis Benoit Quartet
June 5, 6, 8, 9 POP#6 K. Akiyama M. Martin, soprano; B. Zarankin, piano
Y. Guilbert, piano

a
Rudolf Barshai is Music Director and Principal Conductor and Kazuyoshi Akiyama is Conductor Laureate of the VSO.

SOURCE: VSO files.

the Vancouver Museum, the Queen Elizabeth Play- music. Over the years, the repertoire expanded to
house, the Arts Club, the Vancouver Art Gallery, the reflect more classical and romantic symphonic works,
Vancouver Opera Society, and the Vancouver Sym- changing in response to the tastes of the various musi-
phony Orchestra. cal directors. As well, the regular season was length-
The VSO is one of the oldest cultural institutions in ened and the number of scheduled programs and series
Vancouver, with its inaugural concert held in 1897. Reg- increased.
ular seasons were offered in the 1930s when the orches- The orchestra, among the 10 largest in North
tra came under the patronage of Mrs. B. T. Rogers. The America, has been plagued with financial, managerial,
orchestra’s original repertoire included mostly big band and artistic problems over the past two years.
66
Subscription revenue has steadily declined in the last subscription packages for the 1987/88 season in order
five years, putting pressure on the symphony to empha- to reverse this trend. However, the program for the cur-
size sales of single tickets and to heavily promote each rent season was set.
event. With 122 scheduled performances in the Single-ticket sales had also been decreasing, but at
1986/87 season, a 15 percent decrease in regular sub- a slower rate than subscriptions and were becoming
scribers (to the “Jubilee” and “Musically Speaking” relatively more important in terms of total attendance.
series), the sluggish economic climate in Vancouver They accounted for 36,701 tickets sold in the 1985/86
post-Expo ’86, and a deficit of $811,000, the Vancouver season. In 1984/85, regular subscribers accounted for
Symphony Orchestra faced an enormous challenge just 79 percent of the total attendance. However, the pro-
to maintain the status quo, let alone reduce its deficit. portion of subscribers for 1986/87 was projected at
While small consolation, symphony orchestras only 70 percent of total attendance.
throughout North America were going through difficult
times (Newsweek, January 5, 1987, pp. 54–56). In September The Free Concert
1986, the Oakland Symphony declared bankruptcy and One of the ways to offset declining revenues may be to
closed its doors; others, such as the San Diego Symphony focus on nonsubscribers. After a date to make a record-
and the one in Halifax, Nova Scotia, had suspended oper- ing of the VSO was postponed, it was decided in early
ations for a season or more. The Chicago Symphony, December that a “free concert” be given in order to
despite playing to a 98 percent capacity, was able to pay obtain “trial” by the nonsubscriber group. This concert
back only 62 percent of its $20 million operating budget. was held in the evening on Tuesday, January 6, 1987.
On the other hand, the symphonies in Montreal and People had to go to the VSO’s administrative office
Hamilton were enjoying record attendance levels and located three miles away from the Orpheum Theater
renewed financial support. (where the VSO performed) to pick up tickets. After
being heavily promoted on a local FM radio station, the
Decline in Attendance concert was an immediate “sellout” with all 2,761 tickets
At one point in the 1970s, the VSO enjoyed the largest distributed. So as to obtain information about the concert-
subscription base of any orchestra in North America. goers in a cost-effective manner, a questionnaire was
However, the number of subscribers has been steadily developed and given to audience members. Because of
declining. In 1985/86, subscriptions dropped by 18 per- time constraints, an initial draft of the questionnaire was
cent. In 1986/87, the decrease in subscriptions could pretested only on VSO office employees. A photore-
approach 20 percent, for an overall decline since 1984/85 duced copy of the survey is shown in Marketing
of over 30 percent. Plans were being made to revise the Research in Action III-2 along with relevant response

MARKETING RESEARCH IN ACTION III-2

Audience Questionnaire
VANCOUVER SYMPHONY
Audience Questionnaire

Dear Patron,

We at the Vancouver Symphony Orchestra want very much to provide the best possible musical
experience for our audiences and the Vancouver community as a whole. In our continuing efforts
to improve our performances and make your concert-going as satisfying and enjoyable as possi-
ble, we ask that you take a little time to answer the following questions. Your opinions and sug-
gestions are extremely important and will be most useful in helping us to evaluate our programs,
as well as our manner of presentation.
When you leave tonight’s concert, please be so kind as to place the completed questionnaire
in one of the special boxes located near the exits and the VSO Gift Shop. If you do not have time
to complete it this evening, we would request that you mail it to us at your convenience. On
behalf of the members of the orchestra and the staff, thank you very much for your assistance.

Edward Philip Oscapella

Executive Director
Vancouver Symphony Orchestra

400 East Broadway, Vancouver, B.C., V5T 1X2—875-1661

67
 MARKETING RESEARCH IN ACTION III-2 (continued)

1.a Are you a subscriber (i.e., purchase series tickets) to the VSO?
19% 1-1 ___ Yes, currently
29 1-2 ___ No, but formerly
51 1-3 ___ Never subscribed

2. Have you ever purchased tickets to an individual VSO event?

22% 2-1 ___ Yes, since September 1986
51 2-2 ___ Yes, but only before September 1986
26 2-3 ___ No

3. Since September 1986, how many times have you attended a VSO performance?
56% 3-1 ___ I haven’t attended a VSO performance since September 1986
18 3-2 ___ Attended once
12 3-3 ___ Attended 2–3 times
7 3-4 ___ Attended 4–5 times
5 3-5 ___ Attended more than 5 times

4. If you have ever attended previous VSO performances, we would like to know why. Please
indicate the THREE most important reasons from the list below. (1 ⫽ Most Important, 2 ⫽
Second-Most Important, 3 ⫽ Third-Most Important). Write 1, 2, or 3 on the appropriate lines.
i.b ii. iii.
42%a 19% 39% (4- ) ___I wanted to see and hear classical music performed live
2 16 81 (5- ) ___The VSO under Maestro Rudolf Barshai is an excellent
orchestra
7 44 49 (6- ) ___I think the Orpheum is an excellent setting for great
music
13 31 54 (7- ) ___The choice of music appealed to me
13 37 50 (8- ) ___I wanted to see famous guest artists and conductors
Please list any additional reasons below:
(9- ) ___ _________________________________________________________________________
(10- ) ___ _________________________________________________________________________
(11- ) ___ _________________________________________________________________________

5. Overall, what is your rating of the VSO on the following characteristics? Put a checkmark on
the appropriate lines.

EXCELLENT GOOD FAIR POOR

(4) (3) (2) (1)
___ Performance of Orchestra 65%a 33% 1% 0% (12- )
___ Guest Artists 43 53 2 2 (13- )
___ Music Selection 22 59 10 8 (14- )
___ Acoustics in Orpheum 56 39 3 1 (15- )
___ Prices of Tickets 13 46 35 6 (16- )
___ Convenience of Parking 12 41 33 13 (17- )
___ General Atmosphere of Orpheum 63 34 2 1 (18- )
___ Service from VTC-CBO 26 57 13 4 (19- )

6. Please give us your opinion about the amount of each type of music played by the VSO.

TOO ABOUT TOO

MUCH RIGHT LITTLE
(3) (2) (1)
___ Classical (e.g., Bach, Mozart) 6%a 72% 22% (20- )
___ 20th century music (e.g., Debussy, Stravinsky) 14 71 14 (21- )
___ Pops (e.g., Mantovani, Williams) 20 62 18 (22- )
___ Canadian (e.g., Schaeffer) 24 60 16 (23- )

68
MARKETING RESEARCH IN ACTION III-2 (continued)

7. Below are presented eight pairs of events characterized by reputation of performer, seating
arrangements, and single ticket prices. Assuming everything else about each pair is identi-
cal, please check your preference in each case.

International 44% a 56% New, Orchestra & 26% 74% Balcony &
vs. vs.
Performers & 24-1 24-2 Promising $20 price 28-1 28-2 $8 price
$20 price Performers &
$8 price

Orchestra & 30 70 Balcony & International 63 37 New,

vs. vs.
$20 price 25-1 25-2 $14 price Performers & 29-1 29-2 Promising
$20 price Performers &
$14 price

International 77 23 New, Orchestra & 46 54 Balcony &

vs. vs.
Performers & 26-1 26-2 Promising $14 price 30-1 30-2 $8 price
$14 price Performers &
$8 price

International 67 33 New, International 59 41 International

vs. vs.
Performers & 27-1 27-2 Promising Performers & 31-1 31-2 Performers &
Balcony Performers & Orchestra Balcony
Orchestra

8. What concert times do you prefer?

12%a 32-1 ___ Matinees (2:30 P.M.)
34 32-2 ___ 7:30 P.M.
55 32-3 ___ 8:00 P.M.
7 32-4 ___ 8:30 P.M.

9. What day of the week do you prefer to attend concerts?

18%a 33-1 ___ Sunday
21 33-2 ___ Monday
27 33-3 ___ Tuesday
17 33-4 ___ Wednesday
17 33-5 ___ Thursday
25 33-6 ___ Friday
32 33-7 ___ Saturday

10. From where do you get most of your information about VSO events?
47%a 34-1 ___ From VSO mailings
46 34-2 ___ From ads in daily newspapers (e.g., Sun, Province)
3 34-3 ___ From ads in community newspapers
32 34-4 ___ From radio ads
3 34-5 ___ From television ads
10 34-6 ___ From reviews and feature stories
word-of-mouth 9%
34-7 ___ Other—please specify
nonword-of-mouth 3
11. Which daily newspaper do you read most often?
71%a 35-1 ___ Vancouver Sun
24 35-2 ___ Province
7 35-3 ___ Globe and Mail
6 35-4 ___ Other—please specify ________________________________________

12. Are you

39%a 36-1 ___ Male
61 36-2 ___ Female

69
 MARKETING RESEARCH IN ACTION III-2 (continued)

13. To which age group do you belong?

2%a 37-1 ___ Under 18
6 37-2 ___ 18–24
16 37-3 ___ 25–34
17 37-4 ___ 35–44
21 37-5 ___ 45–54
22 37-6 ___ 55–64
19 37-7 ___ 65 and over

14 Please specify your postal code V See EXHIBIT

38 39 40 41 42

15. If you prefer to purchase tickets to individual events (as opposed to subscription tickets),
why is this so? Please indicate below.
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

16. All things considered, what would it take to get you to attend VSO performances on a
regular basis?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

THANK YOU FOR YOUR COOPERATION IN COMPLETING THIS QUESTIONNAIRE, AND

THANK YOU FOR YOUR PATRONAGE OF THE VANCOUVER SYMPHONY.

When you leave tonight’s concert, please place the completed questionnaire in one of the special
boxes located near the exits and the VSO Gift Shop. If you do not have time to complete it this
evening, we would request that you mail it to us at your convenience.

Audience Survey
c/o Vancouver Symphony Society
400 East Broadway
Vancouver, B.C.
VST 1X2

a
Percentages given in questionnaire are for all respondents.
b
i ⫽ most important; ii ⫽ 2nd or 3rd most important; iii ⫽ not ranked in top 3.

frequencies for each question for the entire sample. The data from the survey is in a file called VSO.
Respondents had the choice of dropping off the instru- Marketing Research in Business III-3 provides a sequen-
ment at various places in the Orpheum or mailing it in tial listing of the variables in the file and each variable
later. A total of 614 completed questionnaires from the corresponds to a specific question in the survey. For
2,400 people actually in attendance were returned. example, SUBSCRBR is the first variable and corre-
Since almost everyone attended in groups of two or sponds to Question 1 on the questionnaire. POSTCOD5
more, this was considered a good response rate by is the last variable and refers to the sixth digit of the
management. respondent’s postal code as asked by Question 14.

70
 MARKETING RESEARCH IN ACTION III-3

Variable Listing

Variable Rec Start End Variable Rec Start End

SUBSCRBR 1 1 1 MATINEE 1 32 32
INDPURCH 1 2 2 SVNTHRTY 1 33 33
ATTEND 1 3 3 EIGHT 1 34 34
LIVEMUS 1 4 4 EGHTHRTY 1 35 35
VSOGOOD 1 5 5 SUNDAY 1 36 36
ORPGOOD 1 6 6 MONDAY 1 37 37
CHOICE 1 7 7 TUESDAY 1 38 38
FAMOUS 1 8 8 WEDNESDAY 1 39 39
OTHER1 1 9 9 THURSDAY 1 40 40
OTHER2 1 10 10 FRIDAY 1 41 41
OTHER3 1 11 11 SATURDAY 1 42 42
ORCHSTRA 1 12 12 VSOMAIL 1 43 43
GUESTS 1 13 13 PAPERADS 1 44 44
SELETION 1 14 14 COMMPAPR 1 45 45
ACOUSTIC 1 15 15 RADIOADS 1 46 46
PRICES 1 16 16 TVADS 1 47 47
PARKING 1 17 17 STORIES 1 48 48
ATMSPERE 1 18 18 OTHRSRCE 1 49 49
SERVICE 1 19 19 VANCSUN 1 50 50
CLASICAL 1 20 20 PROVINCE 1 51 51
TWENTITH 1 21 21 GLBEMAIL 1 52 52
POPS 1 22 22 OTHRPAPR 1 53 53
CANADIAN 1 23 23 GENDER 1 54 54
PAIR1 1 24 24 AGEGROUP 1 55 55
PAIR2 1 25 25 POSTCOD1 1 56 56
PAIR3 1 26 26 POSTCOD2 1 57 57
PAIR4 1 27 27 POSTCOD3 1 58 58
PAIR5 1 28 28 POSTCOD4 1 59 59
PAIR6 1 29 29 POSTCOD5 1 60 60
PAIR7 1 30 30 RESPID 1 61 61
PAIR8 1 31 31

RESPID refers to respondent identification and was Given all this information, Ed, Jane, and Doug sat
inserted after receiving the research instruments. It is to down to analyze it and work on a report for the Board
be noted that no quantitative analysis can readily be per- of Directors. They knew that any recommendation(s)
formed on Questions 15 and 16. they make must be supported by the data.

Questions for Discussion

1. What are the strengths and weaknesses of this mar- hoping to resolve and how the data would help
ket research project? you. Make at least one specific recommendation
2. What information can you derive from the data? based on the results of this research.
State specifically the managerial questions you are
71
CASE III-2 POPULAR PIZZAS customers of Popular; this helps in direct marketing
Identifying Consumer Preferences and changing the atmosphere and décor of its shops to
suit its customer lifestyle.
Popular is a local pizza joint with outlets at two loca-
Research Objective 3
tions in Hartford, Connecticut. Apart from a wide
Question: Identify relevant strategies for growth of
range of pizzas, it also serves an indigenously blended
Popular in the city and neighboring towns.
fruit smoothie: Rejoice. The managers of Popular were
Scope: Customers of Popular
of the opinion that understanding customer preferences
This helps in exploring the possibility of a smoothie
and building customer profiles would provide them
shop and new locations for Popular shops in the city
with better scope for business expansion along with
and neighboring towns.
added revenues and profits.
Having reached a unanimous decision to hire an Choosing a Research Approach for
external marketing consultant, the management invited the Popular Study
Dr. K, the president of IMC, a local marketing firm, to Seldom is a data collection method perfectly suited to
its board meeting. Dr. K was provided a report on the a research objective. A successful choice is one that has
shop’s current operations and informed of their need the greatest number of strengths and the fewest weak-
to establish a profile of their customers and their pref- nesses relative to the alternatives. Often this is achieved
erences. Dr. K suggested that in order to win new cus- by combining several methods to take advantage of
tomers and, in turn, to expand their customer base, a their best features and minimize their limitations. This
study had to be conducted on the customers of the was what Dr. K. had to do to get the amount of infor-
competition. Also, the option of converting Popular mation required by the research objectives and still
into a pizza and smoothie shop was decided to be remain within the budget.
explored, laying stress on the Rejoice brand. From the beginning it was clear that the overall
Prior to his second meeting with the management, research approach would involve preliminary qualita-
Dr. K gathered some background information on the tive research, followed by a survey, to understand the
pizza industry, current trends, and preferences for var- current trends in pizza and smoothie consumption
ious varieties of pizzas. He also talked informally with and test the specific hypotheses. Dr. K proposed to use
some of his friends who had visited pizza shops. With magazines such as Pizza Reporter and financial
this background, he was ready to discuss preliminary reports of leading pizza companies to identify the cur-
research purposes and objectives, which could be used rent trends in the industry. An executive summary
as a guide to the design of the study. was then prepared based on this secondary research.
During the second meeting with the Popular man- The problem was to decide the method of data col-
agement, a quick agreement was reached. The primary lection.
purpose of the study was to find the preference patterns The principal survey options were to mail ques-
of Popular’s customers and customers of the competition tionnaires, use personal or telephone interviews, or use
and to establish a profile of a typical customer. The fol- focus-group discussions. Each, however, had a serious
lowing research objectives consist of a research question drawback. Personal interviews using trained inter-
and a statement of the study scope: viewers were simply too costly and would have been
feasible only with a sample that was too small. Focus-
Research Objective 1 group discussions would have provided only qualita-
Question: Study consumption habits of pizza and tive information. The questionnaire could have been
smoothie by Popular customers and by customers of administered by mail, but experience suggested that
competition. the response rates would be low unless substantial
Scope: Customers of Popular and competition incentives and follow-ups were used. The solution was
The customers of competition were included in the a purchase intercept technique in which customers who
study to identify Popular’s strengths and weaknesses visited the Popular shop were asked to fill out a ques-
with respect to competition and also to win customers tionnaire. An incentive was used to boost the response
from competition. rate of the respondents. The advantage of the telephone
in reaching large samples economically was utilized to
Research Objective 2 establish contact with the customers of competition in
Question: Develop demographic and lifestyle profile of areas surrounding the locations of competing pizza
the customers of Popular and customers of competition. shops in that city.
Scope: Customers of Popular and competition The research approach was successful in achieving a
The demographic and lifestyle activities of the high response rate at a low cost per completed interview.
customers help in establishing a typical profile of the The key to success was in matching the approach to the
72
study objectives and the characteristics of the population, preferences in the pizza industry. He used customized
notably, the presence of an up-to-date listing, the limited search services to get financial reports of pizza compa-
geographic area to be covered, and the participants’ nies. This gave him an estimate of the size of the market.
inherent interest in the subject of the survey. Several online periodicals (for example, Pizza Marketing
It was just another pleasant afternoon in Hartford, Quarterly) allowed Dr. K to search for articles on specific
Connecticut. Catherine Jones, president of Popular topics. This helped him save time, compared to the labo-
Pizza, a local pizza shop with two outlets in the city, rious process of scanning periodicals manually. The Inter-
had closed her shop early, as her employees were long net was also used to gather information about the trends
requesting a half-day off to do some Christmas shop- in the smoothie industry. Census data on retail trade
ping. On her way back home, Catherine Jones was came in very handy in giving an estimate of the smoothie
giving a cursory look at the financial report of her shops market in Hartford.
over the past six months. It was business as usual, but Using his information from the Internet, Dr. K was
the growth rate had fallen and the profits were stagnant able to prepare an executive summary on the pizza
during the last two years. Popular’s exotic toppings industry in a couple of days. He divided the summary
helped it differentiate itself in a highly competitive mar- into subcategories that included size of the market,
ket. Popular’s business picked up at a steady pace and trends, and future estimates. The executive summary
Catherine Jones was able to break even in the first two formed the basis for formulating the issues to be
years. But after that, entry of new players in the market addressed specific to Popular during primary data col-
and changing consumer preferences stymied the growth lection. The usage of the Internet for secondary data col-
rate, and profits have remained the same for the past lection helped Dr. K save time and complete the research
two years. Catherine Jones felt the urgent need to make before spring, in spite of his busy schedule.
some changes in the shop’s atmospherics and menu to
bring the growth rate back to a steady pace. Choice of Survey Methods for
Catherine Jones decided to consult a local marketing Popular’s Study
firm, Innovative Marketing Consultants (IMC), to find A market intelligence effort to gather information
the consumer’s preferences and trends in the pizza indus- through surveys was undertaken over a five-week
try and to get a clear idea of her consumer base. She also period in each store. The customers who visited Popu-
wanted to explore the option of having a smoothie shop lar over a period of time (purchase intercept technique)
inside Popular. Catherine Jones had observed that formed a sample for the survey. This sample was a
pizza–smoothie combinations were popular among fam- good prospect for accurate information. Sample sizes of
ilies with kids, but the indigenously blended fruit 200 and 100 consumers were selected from the two
smoothie had appeal for the health conscious single cus- locations A and B, respectively. To obtain information
tomer or groups taking a break from office work as well. about customers of the competition, a telephone survey
Catherine Jones also wanted to implement changes by was conducted in the city. Random samples of respon-
spring, to realize profit gains at the earliest. dents having different prefixes were selected. The sample
Taking into consideration Catherine Jones’s urgency, targeted residents in and around locations of competing
Dr. K, the president of IMC, decided to use the Internet pizza joints in the city. A sample of 400 respondents
for his secondary data search. He used different search was selected at random from the preselected prefixes.
engines—Infoseek, Lycos, and Alta Vista—to get a wide The respondents were asked about their frequency of
coverage of the ‘Net. The Internet was very useful in visits to pizza shops, the factors influencing their choice
gathering information about the current trends and of pizza joints, the service they expect at the pizza

Research Objectives for the Popular Study

Research Objectives Information Requirements

1. What are the consumption habits General attitudes and preferences of

of pizza and smoothie by Popular customers of Popular and strengths and
customers and competition? weaknesses of Popular with respect to
competition.
2. Develop demographic and lifestyle The demographic details such as age,
profile of the customers of number of family members, and income.
Popular and customers of competition. Lifestyle activities of customers such as hobbies.
3. Identify relevant strategies for The strengths and weaknesses of Popular
growth of Popular. with respect to competition, the preferences of
customers and trends in the industry.

73
shop, demographics, and lifestyle activities. Datasets patronage of Popular. Figure III-3 shows that a major-
for Popular Pizzas in Excel and SPSS formats, along ity of the customers are very satisfied with the product
with a copy of the questionnaire used for customers of range and the product quality of Popular. However, the
Popular and customers of competition and a coding figure also indicates that the customers are not happy
sheet is also available in the diskette accompanying this about the price of Popular Pizza. Location, room,
book as well as the website accessible using the link and waiting time are also considered satisfactory,
http://www.drvkumar.com/books/book_mr9.html. while cleanliness has a very high rating by most of
Figures III-1, III-2, III-3, and III-4 show the results of the customers.
the data analysis of the Popular study. Figure III-1 shows Figure III-4 shows the cross-tabulations of the
the frequencies and percents obtained about the age of intentions of the customers to revisit and the age and
people visiting Popular. It can be seen that more than gender of the respondents, respectively. It can be
70 percent of the respondents lie within the 19–34 age seen that the people in the age group of 19–34 who
group. This implies that Popular’s customer base is are also Popular ’s major customers, are also more
predominantly young and that ambience inside Popular likely to revisit. These facts enable Popular to plan
and the menu should reflect the young generation’s its future course of action.
preferences.
It can also be seen from Figure III-2 that there does
not exist significant gender differences with regard to

FIGURE III-1

Age
Cumulative Cumulative
Age (years) Frequency Percent Frequency Percent

⬍18 7 13.5 7 13.5

19–24 24 46.2 31 59.6
25–34 14 26.9 45 86.5
35–44 2 3.8 47 90.4
45–64 5 9.6 52 100.0
Frequency missing = 1

FIGURE III-2

Gender
Cumulative Cumulative
Gender Frequency Percent Frequency Percent

Male 27 52.9 27 52.9

Female 24 47.1 51 100.0
Frequency missing = 2

74
FIGURE III-3

Rating of Popular on Product Range

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

2 4 7.7 4 7.7
3 22 42.3 26 50.0
4 26 50.0 52 100.0
Frequency missing = 1

Rating of Popular on Product Quality

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

2 1 1.9 1 1.9
3 17 32.7 18 34.6
4 34 65.4 52 100.0
Frequency missing = 1

Rating of Popular on Price

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

1 4 8.2 4 8.2
2 13 26.5 17 34.7
3 21 42.9 38 77.6
4 11 22.4 49 100.0
Frequency missing = 4

Rating of Popular on Location

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

1 3 5.9 3 5.9
2 4 7.8 7 13.7
3 16 31.4 23 45.1
4 28 54.9 51 100.0
Frequency missing = 2

Rating of Popular on Room for Dine-in

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

1 1 2.0 1 2.0
2 6 12.2 7 14.3
3 22 44.9 29 59.2
4 20 40.8 49 100.0
Frequency missing = 4

Rating of Popular on Waiting Time

Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

2 6 11.8 6 11.8
3 13 25.5 19 37.3
4 32 62.7 51 100.0
Frequency missing = 2

75
FIGURE III-3 (Continued)
Rating of Popular on Clean Atmosphere
Satisfaction Cumulative Cumulative
Level Frequency Percent Frequency Percent

1 2 4.0 2 4.0
2 4 8.0 6 12.0
3 7 14.0 13 26.0
4 37 74.0 50 100.0
Frequency missing = 3
4—Very satisfied
3—Quite satisfied
2—Somewhat satisfied
1—Not satisfied

FIGURE III-4
Table of Revisit Intention (Q8) by Age (Q18)
Q8 Q20
Frequency
Percent 1 2 3 4 5 Total

1 0 1 0 0 0 1
0.00 1.96 0.00 0.00 0.00 1.96
2 0 0 1 0 0 1
0.00 0.00 1.96 0.00 0.00 1.96
3 0 1 0 0 0 1
0.00 1.96 0.00 0.00 0.00 1.96
5 7 21 13 2 5 48
13.73 41.18 25.49 3.92 9.80 94.12
Total 7 23 14 2 5 51
13.73 45.10 27.45 3.92 9.80 100.00
Frequency Missing = 2

Table of Revisit Intention (Q8) by Gender (Q21)

Q8 Q21
Frequency
Percent 1 2 Total

1 1 0 1
2.00 0.00 2.00
2 0 1 1
0.00 2.00 2.00
3 0 1 1
0.00 2.00 2.00
5 26 21 47
52.00 42.00 94.00
Total 27 23 50
54.00 46.00 100.00
Frequency Missing = 3

76
CHAPTER 19—CASE

CASE 19-1 social class, and life-cycle stage. Social class wasde-
The Seafood Grotto termined using Warner’s Index of Status Character-
istics, which uses the variables of occupation, income
A study involving 158 families, selected randomly source, house type, and dwelling area. Life cycle was
from a large New England city, was designed to help based on four categories: under 40 without children,
The Seafood Grotto, operators of several fine seafood under 40 with children, 40 and over with children in
restaurants, to determine who their customers were. the household, and 40 and over without children in
Four segmentation variables were explored: age, income, the household.

TABLE 19-8
Correlation Coefficients for the Use/Nonuse and Frequency of Use of
an Entertainment Activity

Use/Nonuse Frequency of Use

Social Life Social Life

Entertainment Activity Income Class Age Cycle Income Class Age Cycle

Bowl ⫺.08 ⫺.15b .28a .38a .12 ⫺.04 .35 .25b

b a a a b
Movies .25 .01 .38 .46 ⫺.14 .35 ⫺.44 ⫺.49a
b a a b
Ski .18 ⫺.02 .27 .36 ⫺.05 ⫺.25 ⫺.08 ⫺.07
Golf .43a .06 ⫺.08 .04 .06 .32 .15 .15
a a a
In-state travel ⫺.20 ⫺.02 .26 .25 .09 .06 .14 .05
Out-of-state travel ⫺.24b .10 ⫺.07 .06 .13 ⫺.05 ⫺.03 ⫺.07
Foreign travel .14 .09 ⫺.01 .01 —c —c —c —c
a b a
Dine at expensive restaurant .27 .02 .08 .17 .12 .23 .13 .17b
Dine at moderately priced restaurant ⫺.22a ⫺.03 .17b .20a .19b ⫺.12 .17b .08
b b a a
Dine at inexpensive restaurant ⫺.14 ⫺.16 .25 .31 .10 ⫺.25 ⫺.07 ⫺.07
Nightclubs .12 .08 .32a .41a .28a .11 ⫺.42a ⫺.34a
a b
Cocktail parties ⫺.23 .03 .03 .16 .15 ⫺.02 .05 .01
a a
Professional athletic events ⫺.32 .01 .21 .33 ⫺.13 .07 ⫺.09 ⫺.12
College/high school athletic events ⫺.25a ⫺.06 .11 .17b .35a .23b ⫺.12 ⫺.22b
a
Significant at 0.1 level or better.
b
Significant at .05 level or better.
c
Foreign travel was excluded from this part of the analysis because it rarely occurs more than once a year.

Each segmentation variable was correlated with during the past year. Using Table 19-8, answer the
frequency-of-use descriptions of various entertainment following questions.
activities, ranging from about once a year to more than Source: Prepared by Robert D. Histrich,
once a week, and with a variable that simply noted Michael P. Peters, and David A. Aaker
whether the selected entertainment activities were used as a basis for class discussion.

Questions for Discussion

1. Can you say which segmentation variable is the 2. Looking at the data across activities, which vari-
most relevant for expensive restaurants? ables are the most relevant?
3. Explain the statistical test that is reported.

77
CASE 19-2 Operationally, these variables would be measured
Ajax Advertising Agency by taking a consumer survey covering 250 homemak-
ers randomly selected from the 1,200-member panel.
As a model builder in the marketing services group of These homemakers would be contacted by telephone.
a large advertising agency, you are pondering your lat- The variables would be defined as follows:
est assignment. The task is to develop a model that will 1. Product knowledge: Percentage who were able to
predict the success of new, frequently purchased con- recall advertising claims accurately at the end of
sumer products. Many clients rely heavily on new 13 weeks.
products and need to be able to predict the likelihood 2. Trial: Percentage who made one or more purchases
of success before undertaking expensive test markets. of the product during the first 13 weeks.
They also need guidance in developing products and 3. Repeat purchases: Percentage who had purchased
marketing programs that will be successful in the test and used the product who repurchased it or
market and, ultimately, in national distribution. planned to do so.
Preliminary discussions with a set of client repre-
sentatives and other agency people already have pro- The immediate task was to develop three sets of
vided some tentative conclusions: explanatory or independent variables that would explain
and predict the three dependent variables. In addition, it
1. It has been decided that to support the model would be necessary to specify the nature of the causal
developing and testing process, a panel of 1,200 relationship—whether it would be, for example, additive
households would be established in a city often or multiplicative and/or linear or nonlinear.
used as a test market. Thus, as new products were One variable seemed obvious. Product knowledge
introduced into this city, the panel could be used should depend on the level of advertising. Advertising
to monitor their performance. Over a period of could be measured in several ways. It would be possible,
three years it was expected that 50 or 60 products by monitoring local and national media, to estimate the
could be observed. average number of media impressions (advertisement
2. It was suggested that product success depends on exposures) per household. It was not clear, however, if
obtaining consumer knowledge of the product, advertising’s impact on product knowledge was linear.
enticing people to try the product, and then Several other tasks must be faced eventually. For
achieving respectable levels of repurchase. Thus, it instance, the model will need to be tested and validated.
was concluded that a useful model would be one The database to be collected could be used for this pur-
that was capable of predicting and explaining the pose. The variables to be included in the database will
following three variables: (1) product knowledge, need to be specified soon. Also, thought will have to be
(2) trial, and (3) repeat purchase. given to how and when managers should use the model.
Assignment 1

Develop a model of product knowledge. Specify vari- such a model could be tested. Prepare a one-page paper
ables, indicating precisely how they should be mea- summarizing your model.
sured in any test application of the model. Indicate how

Assignment 2

Develop a model of trial purchase and a model of set of models if you were coming out with a new type
repeat purchase. Indicate how you would use such a of packaged cake mix.

CASE 19-3 for 72 districts and included the total number of regis-
tered voters by district, their party affiliation, the num-
Election Research, Inc.
ber of votes received by each candidate, the campaign
expenditures of each candidate, and the identity of the
Election Research, a marketing research firm specializing
incumbent, if one existed.
in political campaigns, did an analysis on the 1996
Of the 72 districts used, 27 had Republican win-
California state legislature elections. Data were obtained
ners and 45 had Democratic winners. There were 55
78
incumbent winners and 17 nonincumbent winners. r 2 ⫽ .440
The winners received an average of 66.6 percent of the N ⫽ .55
votes cast and incurred 63.2 percent of the advertis-
ing expenses. The winner’s advertising expenditure Nonincumbent districts:
averaged $18,031 per district ($22,805 without an WSV ⫽ 0.212 ⫹ 0.234WSTE(3.39)
incumbent and $10,710 with an incumbent).
⫹ 0.399WSRV(3.21)
The following are the results of three regression
runs (the numbers in parentheses are the t-values): r 2 ⫽ .615
N ⫽ 17
All districts:
where
WSV ⫽ 0.240 ⫹ 0.174WSTE(4.82) WSV ⫽ winner’s share of total votes cast
⫹ 0.414WSRV(4.60) ⫹ 0.751(7.01) WSTE ⫽ winner’s share of total advertising
expenditures
r 2 ⫽ .535
WSRV ⫽ proportion of registered voters that
N ⫽ 72
are registered to the winner’s politi-
Incumbent districts: cal party
I ⫽ winner’s incumbency dummy vari-
WSV ⫽ 0.329 ⫹ 0.157WSTE(3.67) able. A dummy variable is a 0–1
variable. In this case I ⫽ 1 for an
⫹ 0.409WSRV(6.07)
incumbent district and I ⫽ 0 for a
nonincumbent district.

Questions for Discussion

1. Interpret the regression coefficients. For all dis- 3. Why does the incumbency dummy variable appear
tricts, what exactly does the coefficient 0.174 mean? only in the first equation?
Interpret the coefficients 0.414 and 0.75 as well. 4. Could this model be used productively to predict?
Why is the coefficient for the WSTE variable dif- What insights could a candidate get from the model?
ferent in the three equations?
2. Explain exactly what the t-value means. Determine Source: Prepared by Scott Vitell and David A. Aaker
the p-value associated with each. Interpret r 2. Why of the University of California at Berkeley
is r 2 different for each equation? as the basis for class discussion.

CHAPTER 20—CASE

CASE 20-1 those willing to give up some heat in their homes dif-
Southwest Utility fered from those who were not willing. Accordingly,
the two groups are profiled in Table 20-7 on the basis
In view of the problem of pollution from energy of 10 variables.
sources it was felt that a need existed for an in-depth The table shows the mean values for each group,
baseline study of consumer attitudes and perceptions the F-ratio, which reflects the statistical significance of
of energy-related issues. As a result, a study was con- the difference between the means, and the standardized
ducted in February 1994 (at the peak of the pollution discriminant coefficients.
problems) on a variety of energy-related issues. Interpret the table elements. What is the appropriate
A mail questionnaire was sent to 2,500 residents of interpretation of each term? Which variables are the most
three medium-sized cities. A total of 922 respondents helpful in identifying the characteristics of the group?
returned the questionnaire. A sample of 574 of the What are the appropriate hypothesis tests to be used in
respondents was selected for the initial analysis. One the analysis?
key question asked if the respondent would be willing
to give up degrees of heat in the home in order to Source: Prepared by David J. Barnaby, Richard
achieve less air pollution, assuming that such a trade- C. Reizenstein, and David A. Aaker as a basis
off were possible. One analysis was to determine how for class discussion.

79
TABLE 20-7
Discriminant Analysis for Two Home Heat Preference Groups

Group 1 Group 2

Prefer Less Heat Prefer Same Heat

n ⫽ 171 n ⫽ 378 Standardized
Mean Mean Discriminant
Variablea F-Ratio (Standard Deviation) (Standard Deviation) Coefficients

Family member 5.87 0.39 0.25 .35

15–19 years (0.69) (0.58)

Paid family 3.81 2.16 1.93 .28

members (1.31) (1.28)

Education 14.34 4.05 3.55 .31

(1.30) (1.48)

Income 5.67 3.64 3.28 ⫺.08

(1.59) (1.66)

Television 4.42 2.64 2.43 .14

(1.04) (1.09)

Magazines 7.08 2.05 1.76 ⫺.03

(1.16) (1.20)

Civic clubs 7.68 1.44 1.14 .28

(1.22) (1.16)

Spouse 4.80 1.27 1.04 .18

(1.14) (1.14)

Amount each family 16.94 3.55 2.57 ⫺.05

should pay (2.87) (2.42)

Amount family is 18.29 3.98 2.89 .12

willing to spend (3.13) (2.61)

Mean discriminant 0.44 ⫺.20

score (significant at
.001 level)
a
Nonsignificant (at the .05 level) variables include the following demographics: sex, marital status, family size, age distribution of persons 0–14 and over 20 living at home, mobility,
race, age (of respondent), and length of time as area resident. Only variables with an F-ratio included at the .05 level of significance are displayed.

A second factor analysis was conducted on the super-

CASE 20-2
Store Image Study market data, and the results are shown in Table 20-9.
Source: Based on a study by John Dickson and
Table 20-8 shows the output of a factor analysis con- Gerald Albaum, “A Method for Development
ducted on the ratings of 82 respondents who were of Tailormade Semantic Differentials for
asked to evaluate a particular discount store using 29 Specific Marketing Content Areas,”
semantic-differential, seven-point scales. The same Journal of Marketing Research, 8,
respondents were asked to evaluate a supermarket. February 1977, pp. 87–91.
80
 Questions for Discussion

1. Label the factors. Compare these factors with those 2. Analyze the communalities. Which are low? What
found in the discount store analysis of Table 20-8. are the implications? Contrast with Table 20-8.
Why should they be different? Hint: It isn’t
because a discount store is different from a super-
market.

TABLE 20-8
Factor Loadings for a Discount Store (Varimax Rotation)

Factor
Scale I II III IV V Communality

1. Good service .79 ⫺.15 .06 .12 .07 .67

2. Helpful salespersons .75 ⫺.03 .04 .13 .31 .68
3. Friendly personnel .74 ⫺.07 .17 .09 ⫺.14 .61
4. Clean .59 ⫺.31 .34 .15 ⫺.25 .65
5. Pleasant store to shop in .58 ⫺.15 .48 .26 .10 .67
6. Easy to return purchases .56 ⫺.23 .13 ⫺.03 ⫺.03 .39
7. Too many clerks .53 ⫺.00 .02 .23 .37 .47
8. Attracts upper-class customers .46 ⫺.06 .25 ⫺.00 .17 .31
9. Convenient location .36 ⫺.30 ⫺.02 ⫺.19 .03 .26
10. High quality products .34 ⫺.27 .31 .12 .25 .36
11. Good buys on products .02 ⫺.88 .09 .10 .03 .79
12. Low prices ⫺.03 ⫺.74 .14 .00 .13 .59
13. Good specials .35 ⫺.67 ⫺.05 .10 .14 .60
14. Good sales on products .30 ⫺.67 .01 ⫺.08 .16 .57
15. Reasonable value for price .17 ⫺.52 .11 ⫺.02 ⫺.03 .36
16. Good store .41 ⫺.47 .47 .12 .11 .63
17. Low pressure salespersons ⫺.20 ⫺.30 ⫺.28 ⫺.03 ⫺.05 .18
18. Bright store ⫺.02 ⫺.10 .75 .26 ⫺.05 .61
19. Attractive store .19 .03 .67 .34 .24 .66
20. Good displays .33 ⫺.15 .61 .15 ⫺.20 .57
21. Unlimited selections of products .09 .00 .29 ⫺.03 .00 .09
22. Spacious shopping .00 .20 .00 .70 .10 .54
23. Easy to find items you want .36 ⫺.16 .10 .57 .01 .49
24. Well-organized layout ⫺.02 ⫺.05 .25 .54 ⫺.17 .39
25. Well-spaced merchandise .20 .15 .27 .52 .16 .43
26. Neat .38 ⫺.12 .45 .49 ⫺.34 .72
27. Big store ⫺.20 .15 .06 .07 ⫺.65 .49
28. Ads frequently seen by you .03 ⫺.20 .07 .09 .42 .23
29. Fast checkout .30 ⫺.16 .00 .25 ⫺.33 .28
Percentage of variance explained 16 12 9 8 5
Cumulative variance explained 16 28 37 45 50

Possible Factor Interpretations:

Factor I Good service—friendly Factor IV Spaciousness
Factor II Price level Factor V Size
Factor III Attractiveness

81
TABLE 20-9
Factor Loadings for a Supermarket (Varimax Rotation)

Factors
Scale I II III IV V Communality

1. Well-spaced merchandise .73 .10 ⫺.11 .02 .12 .57

2. Bright store .63 ⫺.08 .45 ⫺.11 .06 .62
3. Ads frequently seen by you ⫺.04 .08 ⫺.02 ⫺.12 .58 .36
4. High-quality products .50 .32 .24 .01 ⫺.03 .41
5. Well-organized layout .70 .08 .05 ⫺.00 .12 .51
6. Low prices ⫺.09 .64 ⫺.02 .19 .18 .49
7. Good sales on products .27 .73 ⫺.00 ⫺.10 ⫺.01 .62
8. Pleasant store to shop in .63 .36 .09 .12 .01 .55
9. Good store .73 .37 .26 .19 ⫺.06 .78
10. Convenient location .18 .01 .59 ⫺.10 .36 .52
11. Low pressure salespersons ⫺.15 .05 .40 ⫺.06 ⫺.11 .20
12. Big store .08 ⫺.02 .42 ⫺.00 .14 .20
13. Good buys on products .35 .73 .04 .18 ⫺.10 .70
14. Attractive store .68 .28 .38 .10 ⫺.10 .70
15. Helpful salespersons .43 .16 .34 .34 .45 .64
16. Good service .60 .19 .21 .35 .01 .56
17. Too many clerks ⫺.06 .03 ⫺.01 .62 ⫺.08 .40
18. Friendly personnel .48 .11 .17 .47 .36 .62
19. Easy to return purchases .39 .10 .01 ⫺.10 .43 .36
20. Unlimited selection of products .10 .09 .48 .17 ⫺.18 .31
21. Reasonable prices for value .24 .71 .04 .01 .13 .58
22. Neat .87 ⫺.00 .11 .07 .04 .78
23. Spacious shopping .72 .02 ⫺.26 ⫺.01 .18 .62
24. Attracts upper-class customers .38 ⫺.37 ⫺.17 ⫺.06 .06 .32
25. Clean .83 .11 .16 .12 .03 .74
26. Fast checkout .22 .12 ⫺.07 .68 ⫺.13 .55
27. Good displays .73 .19 .07 .14 .13 .61
28. Easy to find items you want .57 .23 ⫺.08 .03 ⫺.01 .39
29. Good specials .37 .62 .08 .06 .32 .63
Percentage of variance explained 26 11 6 5 5
Cumulative variance explained 26 37 43 48 53

CASE 20-3 ultimate objective to use segmentation procedures to

Behavioral Research identify and describe the type of person who has
“throwaway” tendencies and to contrast this consumer
A considerable amount of the nation’s resources are type with others who have different tendencies.
spent handling and replacing discarded products.
Thus, it would be useful to modify the consumer’s behav- Description of the Research
ior, encouraging product maintenance and repair and In-home interviews were conducted with 311 residents of
discouraging style-oriented replacement decisions. the city of Santa Monica, California. To be an eligible
Before addressing the task of modifying current respondent, some member of their household had to
consumer behavior regarding product disposal deci- have disposed of one of a selected list of 12 small
sions, it seemed appropriate to researchers at Behav- electric appliances during the past year. The product
ioral Research to conduct a study determining current list included appliances characterized by rapid techno-
behavioral patterns. They therefore proposed and logical innovation (for example, toaster ovens), those for
received government funding for a study with an which style innovation is rapid (for example, electric
82
toothbrushes), and those considered “stable” (for exam- The research objective was to identify variables that
ple, vacuum cleaners). would distinguish between individuals who chose dif-
Respondents were asked how they disposed of the ferent means of disposing of small electric appliances.
product. The following are the choices offered and the Two sets of variables were included in the study. The first
number of respondents in each category. was a standard set of demographic variables including
age, marital status, education, occupation, and family
Number of
Respondents
income. The second was a set of lifestyle or psycho-
graphic variables which were developed exclusively for
Discarded the product 65 this study. A total of 65 (5-point agree–disagree) state-
Stored the product 128 ments were drawn from a review of the literature of con-
sumers’ opinions on matters such as product durability,
Sold, donated, or traded in the product 62
the repair industry and the like and from statements
Gave the product to a friend 56
made by participants in three focus groups conducted
Total 311 during the exploratory phase of the project. The lifestyle
statements were thus all related to disposition behavior
Thus, a total of 65 of the 311 respondents discarded the as opposed to being general lifestyle statements.
product, whereas 246 of the respondents selected one A factor analysis was conducted on the 65 lifestyle
of the alternate choices. variables. The results are shown in Table 20-10.

TABLE 20-10
Factor Loadings of the Lifestyle Statements

Factor 1
Products break down too soon these days. .719
Products are built so cheaply today that they are meant to be thrown out rather .595
than repaired.
Today greater attention is devoted by manufacturers to performance standards ⫺.593
and durability.
Products aren’t built like they used to be. .592
I am often disappointed with the durability of products I buy. .541
Too many products are built in such a way that they can’t be easily repaired. .529
Today’s products are vast improvements over products of the past. ⫺.461
TOTAL VARIANCE EXPLAINED 11.6%

Factor 2
I like to have “the latest thing” in appliances. .602
I like modern, stylish things. .580
I sometimes replace a perfectly usable product with one that is more stylish. .486
I sometimes replace a product even though it is still useful. .473
Style changes in products are unimportant. ⫺.467
I am convenience oriented. .400
TOTAL VARIANCE EXPLAINED 9.5%

Factor 3
I don’t pay much attention to the use and care booklets that come with products. .608
I read product labels and instruction booklets carefully. ⫺.596
I don’t take care of products the way I should. .459
I look for products with good warranties. ⫺.452
In general, I make wise purchase decisions. ⫺.409
TOTAL VARIANCE EXPLAINED 5.4%

Factor 4
If a product costing less than $40 breaks down I’m likely to discard it without .694
much hesitation.

83
 TABLE 20-10 (continued)

If a product costing less than $60 breaks down I’m likely to discard it without .596
much hesitation.
If a product costing less than $20 breaks down I’m likely to discard it without .594
much hesitation.
Once something on a product breaks, you might as well throw it away. .491
I feel a responsibility to have a product repaired rather than replaced ⫺.390
whenever feasible.
I often buy less expensive products so that I can throw them away without .370
feeling guilty.
It is often cheaper to buy a new product than to have an old one repaired. .350
TOTAL VARIANCE EXPLAINED 4.8%

Factor 5
It takes too long to have a product repaired. .705
It is really hard to get a product repaired these days. .613
Getting an item repaired is usually very inconvenient. .514
The repair industry is a “rip-off.” .502
It is too expensive to get many smaller products repaired. .430
You can’t trust most repair shops. .414
TOTAL VARIANCE EXPLAINED 3.6%

Factor 6
I am a “pack rat.” .523
I often keep old appliances around the house rather than get rid of them. .462
I often give away old products to relatives or friends. .420
I like to fix things. .400
I tend to keep old products until I move—then I throw or give them away. .364
I always buy “new” rather than “used.” .350
TOTAL VARIANCE EXPLAINED 3.3%

Factor 7
Consumers are more price conscious today than ten years ago. .508
Labels on products should be more informative. .459
Advertisements should be more informative. .394
The repair industry should be regulated. .349
TOTAL VARIANCE EXPLAINED 3.0%

Questions for Discussion

1. Label and describe the factors. 6. Which of the factors will be the best predictors of
2. Assume that a national probability sample was disposal behavior? Which demographic variables?
going to be obtained in a follow-up study. Identify Be specific in your hypotheses.
two of three variables to represent each factor.
3. How many of these factors should be considered Source: Written by Marian Burke,
for subsequent analysis? W. David Conn, Richard J. Lutz,
4. What analysis would you now recommend? and David A. Aaker as a basis
5. What set of variables do you feel will be more use- for class discussion.
ful in identifying those who discard products: the
demographic or the lifestyle variables?
84
CHAPTER 21—CASE

CASE 21-1
Nester’s Foods

Nester’s Foods is evaluating a group of concepts for to group 38 food products, including 10 of the new diet
new diet products. To evaluate the positioning of these concepts. The output of the MDS, based on these sim-
new products, an MDS study was conducted. The ilarity ratings, is shown in Figure 21-10. “L.C.” stands
respondents, women who were on a diet, were asked for low calorie, and “M/S” stands for meal substitute.

Candy bar

Almonds Cookies
Dry-roasted peanuts Pudding Gum M/S candy bar

Potato chips Ice cream L.C. snacks L.C. cookies

Milkshake L.C. chips
M/S pudding
Coffee M/S hotdog
and Danish M/S 3
L.C. milkshake Gelatin
M/S 4
Weightwatchers
diet L.C. hot soup
Metrecal
Cigarettes Sucaryl
Milk

Sandwich Bacon
Yogurt
Coffee

Apple Fruit salad

Hotdog Soup
Codfish Celery
Steak
Grapefruit

FIGURE 21-10
Two-dimensional perceptual configuration of 38 food products.
SOURCE: Adapted from Yoram Wind and Patrick J. Robinson, “Product Positioning: An Application of
Multidimensional Scaling,” in Russell L. Haley (ed.), Attitude Research in Transition, Chicago: American Marketing
Association, 1972.

Questions for Discussion

1. Label the dimensions. 3. What other information would you collect, and
2. Group the products into clusters visually and how would you use it in the analysis?
describe the different clusters. What are the posi-
tioning implications?

85
CASE 21-2 The study involved the following questionnaire,
Pepsi-Cola distributed to a representative sample of 64 undergrad-
uates from U.S. colleges. Ten objects were included:
Ed Sturdley, the marketing research manager for Pepsi, 1. Pepsi
had commissioned a perceptual mapping study of Pepsi 2. Diet 7-Up
in the college market. He had been concerned with the 3. Calistoga Natural Orange
fact that perceptual maps tended to be sensitive to the 4. 7-Up
approach used. Therefore, he had insisted that the data 5. Slice 10% Fruit Juice
contain information so that perceptual maps could be 6. Schweppes Sparkling Water
conducted using similarity, preference, or attribute data. 7. Dr. Pepper

2.0

1.6

Diet 7-Up 1.2

.8 Diet
Calistoga Coke
.4 7-Up
Dimension 1

Dr. Pepper

–2.0 –1.6 –1.2 –.8 –.4 .4 .8 1.2 1.6 2.0

Pepsi Slice Pepsi
Light –.4

–.8
Coke
–1.2

–1.6 Schweppes

–2.0

Dimension 2
FIGURE 21-11
Perceptual map using preference data.

8. Diet Coke data is shown in Figure 21-11. The two-dimensional fit

9. Coke was extremely good for both. If anything, the
10. Pepsi Light preference-based map had a slightly higher fit.
The analysis of the similarity data is shown in
Figure 21-5. A perceptual map based on the preference

Questions for Discussion

1. Critique the questionnaire. Was it complete? 3. Conduct any other analysis that you believe would
Would you have asked the questions the same be useful. Interpret the results. Among the analy-
way? ses that could be run would be analyses to com-
2. Compare the preference map with the similarities pare perceptual maps obtained from
map. What differences do you see? What are their ■ Attribute, similarity, and preference data.
implications? Which is the “correct” map? ■ Factor analysis vs. discriminant analysis of the
attribute data.
86
 ■ Subsets of the data such as males, those prefer- three or above and using correspondence
ring a cola, those preferring a diet drink, or the analysis.
heavy drinkers. ■ Conducting a cluster analysis of the drinks
■ Subsets of the objects such as the subset exclud- using the attribute data and again using the
ing all diet drinks or the subset excluding the similarity data.
nondiet colas. ■ Conducting a cluster analysis of the respondents.
■ Converting the attribute data to binary by
indicating whether the attribute rating was

The questionnaire consisted of six sets of questions:

I. Please rate the following pairs of drinks as to how similar they are. Circle the appropriate number.

Very Very Coded

Similar Different Column

Pepsi–Diet 7-Up 1 2 3 4 5 6 7 8 9 1
Pepsi–Calistoga Natural Orange 1 2 3 4 5 6 7 8 9 2
Pepsi–7-Up 1 2 3 4 5 6 7 8 9 3
Pepsi–Slice 10% 1 2 3 4 5 6 7 8 9 4
. .
. .
. .
Dr. Pepper–Diet Coke 1 2 3 4 5 6 7 8 9 40
Dr. Pepper–Coke 1 2 3 4 5 6 7 8 9 41
Dr. Pepper–Pepsi Light 1 2 3 4 5 6 7 8 9 42
Diet Coke–Coke 1 2 3 4 5 6 7 8 9 43
Diet Coke–Pepsi Light 1 2 3 4 5 6 7 8 9 44
Coke–Pepsi Light 1 2 3 4 5 6 7 8 9 45

II. Indicate your attitude toward the following drinks.

Dislike My Coded
Strongly Dislike Like Favorite Column

Pepsi 1 2 3 4 5 6 7 8 9 46
Diet 7-Up 1 2 3 4 5 6 7 8 9 47
Calistoga Natural Orange 1 2 3 4 5 6 7 8 9 48
7-Up 1 2 3 4 5 6 7 8 9 49
Slice 10% Fruit Juice 1 2 3 4 5 6 7 8 9 50
Schweppes Sparkling Water 1 2 3 4 5 6 7 8 9 51
Dr. Pepper 1 2 3 4 5 6 7 8 9 52
Diet Coke 1 2 3 4 5 6 7 8 9 53
Coke 1 2 3 4 5 6 7 8 9 54
Pepsi Light 1 2 3 4 5 6 7 8 9 55

III. From the above list, circle the drink you bought last. (56) (10 brands coded 0 to 9 in order of question 2)

IV. Indicate your agreement or disagreement with the following statements.

Agree Disagree Coded

Strongly Strongly Column

Pepsi is:
Refreshing 1 2 3 4 5 6 7 8 9 57
Sweet Tasting 1 2 3 4 5 6 7 8 9 58
Fruity 1 2 3 4 5 6 7 8 9 59
Full-Bodied 1 2 3 4 5 6 7 8 9 60
For the Young and Active 1 2 3 4 5 6 7 8 9 61
Fattening 1 2 3 4 5 6 7 8 9 62

87
(continued )

Diet 7-Up is:

Refreshing 1 2 3 4 5 6 7 8 9 63
Sweet Tasting 1 2 3 4 5 6 7 8 9 64
Fruity 1 2 3 4 5 6 7 8 9 65
Full-Bodied 1 2 3 4 5 6 7 8 9 66
For the Young and Active 1 2 3 4 5 6 7 8 9 67
Fattening 1 2 3 4 5 6 7 8 9 68
. .
. .
. .
Pepsi Light is:
Refreshing 1 2 3 4 5 6 7 8 9 111
Sweet Tasting 1 2 3 4 5 6 7 8 9 112
Fruity 1 2 3 4 5 6 7 8 9 113
Full-Bodied 1 2 3 4 5 6 7 8 9 114
For the Young and Active 1 2 3 4 5 6 7 8 9 115
Fattening 1 2 3 4 5 6 7 8 9 116

V. What is the number of times during the last week that you consumed one of these beverages (117–118)
VI. I am a male I am a female (119)
(coded a 1 if male and 2 if female)
Identification Number (120–121)

CASE 21-3 dimension was freeway travel. If that limitation were

The Electric Truck Case removed, the electric vehicle could be used for 19 per-
cent of applications. In the second phase of the study,
John Hirsch of Central Utility was attempting to people responsible for purchases of commercial trucks
develop conclusions from a conjoint analysis study of were invited to an “electric vehicle seminar at which an
electrically powered trucks. The study objectives were operating electric truck was available for inspection
(1) to determine the number of commercial applications and test driving.” During the seminar they discussed
that were compatible with the limitations of electric the advantages and disadvantages of electric vehicles
vehicles, and (2) to assess the perceived importance of and participated in a conjoint analysis study.
those technical requirements as compared to other As Table 21-2 indicates, the conjoint study
vehicle characteristics, such as initial costs and pollu- involved five attributes, each of which had two levels
tion levels. associated with it. For example, the initial price was
In the first phase of the study, a sample of truck either $5,000 or $8,000. The respondents were those
owners was interviewed and the nature of their appli- attending the electric vehicle seminars. Each respon-
cations was determined. They found that 11 percent of dent was asked to rank 16 alternative truck designs,
commercial truck applications could get along with the based on the attributes shown in Table 21-2. The rank-
electric vehicle limitations of a 4-mile range, a maxi- ings of the respondents were averaged and provided
mum of 40 stops, a load limit of 1,500 pounds payload, the inputs to a conjoint analysis program. The output
and “seldom” freeway travel. The most sensitive utilities also are shown in Table 21-2.

88
TABLE 21-2
Relative Utilities of Conventional versus Electric Vehicles

Attribute Conventional Vehicle Utility Electric Vehicle Utility

Speed and range Unlimited ⫹1.426 40 mph and 40 miles ⫺1.426

Operating costs Standard: 20 cents/mile ⫺0.928 Reduced: 10 cents/mile ⫹0.928
Initial price Standard: $15,000 ⫹0.901 Premium: $18,000 ⫺0.901
Pollution levels Standard: Gasoline engine ⫺0.544 Zero ⫹0.544
Propulsion system Conventional: Gasoline engine ⫺0.019 New propulsion system ⫹0.019
Net utility ⫹0.836 Net utility ⫺0.836

Questions for Discussion

Evaluate the study. Do you feel the attributes and the Source: Prepared by George Hargreaves, John D.
attribute levels were well selected? Interpret Table 21-2. Claxton, Frederick H. Siller, and David A. Aaker
as a basis for class discussion.
1. What information does it contain?
2. What are the underlying assumptions?
3. What additional analysis might be useful to do?

CASE 21-4 as to whether a two-by-two trade-off or the full-profile

Fargo Instruments approach should be used. However, Ed wondered if
there might be alternatives to conjoint that may work
Ed Heedam was an account executive for the marketing in this case, alternatives that may be more amenable to
research firm, Boyle Research, and was designing a telephone interviewing and provide the same informa-
study for Fargo Instruments, makers of private-label cal- tion. In particular, he was considering two alternatives,
culators for major retailers. One of Fargo’s retail chain a constant-sum approach and a dollar-metric approach.
customers wanted to review its line of calculators. The In the constant-sum approach the respondent
need was to determine what types of features to offer in would allocate 10 points over the five attributes pro-
the next generation of models. Among the features that portional to the attribute’s importance to him or her. In
could be included in a model were rechargeability, finan- the dollar-metric approach, the respondent would be
cial functions, statistical functions, warranty, and alge- asked to indicate what attribute level would be least
braic parentheses to assist calculation. The study needed preferred (unless the answer was obvious) and how
to estimate how much the target customer group, college much he or she would pay to receive another attribute
students, would pay for the various features. The tenta- level. Both would force the respondent to choose
tive plan was to use a telephone interview. between attributes and would thus address the “I like all
One option was clearly conjoint measurement. If the features” problem of simply asking directly for the
conjoint was used, there would need to be a decision importance of each attribute.

Questions for Discussion

1. What are the similarities and differences between 2. Would you select the full-profile or the trade-off
the constant-sum and dollar-metric approaches to approach?
conjoint? Which are best suited to telephone inter- 3. What other changes would you consider making
viewing? Which would you select in this case? in the design?
Under what circumstances would conjoint tend to
be preferred? What about the dollar metric? What
about the constant sum?
89
CHAPTER 22—CASE

Cases for Part IV

Special Topics in Data Analysis

CASE IV-1
Smith’s Clothing (B)
In the Smith’s Clothing (A) case a research project was 4. A 10-question scale that measures opinion leader-
developed in which the following types of information ship in women’s fashions and the tendency to dis-
were gathered: cuss women’s fashions.
5. A set of importance weights on the 20 attributes
1. Image data using 20 attributes for four different used in the image question bank.
stores, including Smith’s. 6. Demographic variables.
2. Patronage data: where respondents shopped and
where they last bought. Develop an analysis strategy using the various multi-
3. A bank of 30 lifestyle questions relating to shopping variate techniques that have been covered. The sample
and women’s clothing. size is 1,000.

CASE IV-2 The projected P & L for the first year national was
NewFood 1 There were no capital expenditures required to go
national, since manufacturing was to be done on a
Mr. Conrad Ulcer, newly appointed New Products mar- contract pack basis. These costs were included in the
keting director for Concorn Kitchens, was considering projected P & L. Concorn has an agreement with the con-
the possibility of marketing a new highly nutritional food tract packer requiring that once a decision to go national
product with widely varied uses. This product could be is made, Concorn is obligated to pay fixed production
used as a snack, a camping food, or as a diet food. The costs ($1 million per year) for three years even if the
product was to be generically labeled Newfood. product is withdrawn from the market at a later time.
Because of this wide range of possible uses, the Even though there are no capital requirements,
company had great difficulty in defining the market. it was the company’s policy not to introduce new prod-
The product was viewed as having no direct competi- ucts with profit expectations of less than $.5 million
tors. Early product and concept tests were very per year (a three-year planning horizon was usually
encouraging. These tests led Mr. Ulcer to believe that considered). Because there was considerable uncertainty
the product could easily sell 2 million cases (24 pack- among Concorn management as to either probable first-
ages in a case) under the proposed marketing program year or subsequent-year sales, or the best introductory
involving a 24-cents package price and an advertis- campaign, it was decided that a six-month market test
ing program involving $3 million in expenditures would be conducted. The objectives of the test were to
per year. ■ Better estimate first-year sales.
■ Study certain marketing variables to determine an
Sales 2.00 million cases optimal—or at least better—introductory plan.
Revenue $8.06 million (assumes 70% of the ■ Estimate the long-run potential of the product.
retail price is revenue to the These objectives were accomplished through the con-
manufacturer) trolled introduction of the product into four markets.
Manufacturing $3.00 million ($1 million fixed
Conditions were experimentally varied within the gro-
costs manufacturing costs plus $1 per
case variable)
cery stores in each of the four markets. Sales were
measured with a store audit of a panel of stores. Pre-
Advertising $3.00 million
liminary results had been obtained. Now it was up to
Net margin $2.06 million Mr. Ulcer to decide what they meant for the introduc-
tory strategy of Newfood.
1
Reproduced with permission from Prof. Gerald Eskind and the Board of Trustees, Leland Stanford Junior University, Stanford, CA.
90
Design of Experimental Study P ⴝ 24 P ⴝ 29 P ⴝ 34
The three variables included in the experimental design cents cents cents
were price, advertising expenditures, and location of the City ADV Level L1 L2 L1 L2 L1 L2
product within the store. Three prices were tested
(24 cents, 29 cents, 34 cents); two levels of advertising 3 Low
(a simulation of a $3 million introduction plan and a 4 Low
$6 million plan); and two locations (placing the product 1 High
in the bread section versus the instant breakfast section). 2 High
Prices and location were varied across stores within cities
while advertising was varied across cities. The advertis- P ⫽ Price
L ⫽ Location
ing was all in the form of spot TV. The levels were 3 stores per cell
selected so that they would simulate on a local basis the
impact that could be achieved from national introduction
programs at the $3 million and $6 million expenditure Total for
levels. Due to differential costs between markets and dif- Per Month Six Months
ferential costs between spot and network (to be used in
national introduction), an attempt was made to equate Per price 24 144
(and mea-sure) advertising inputs of gross advertising Per location 36 216
impressions generated, normalized for market size. Per adv. level 36 216
Unfortunately, it was not possible to achieve exactly the Per city 18 108
desired levels. This was due to the problem of nonavail-
Total 72 432
abilities of spots in some markets and discrepancies
between estimate of TV audiences made at the time the
test was being planned and the actual audiences reached
at the time the commercials were actually run. The design generated the following sample sizes:
The advertising plan and actual gross rating points The data were analyzed on a bimonthly basis. The
(GRPs) achieved, by city, are as follows: response measure used in the analysis was average unit
sales per month per experimental cell.
Advertising
Plan—Simulation
Control Measures
of First-Year Desired Actual
National GRPs per GRPs In the selection of cities and stores for the tests,
City Program Week Achieved attempts were made to match cells and cities on such
variables as store size, number of checkout counters,
3 $3.0 million 100 105 and characteristics of the trading area. Because it was
4 $3.0 million 100 110 not certain that adequate matches had been achieved,
1 $6.0 million 200 165 it was decided to obtain measurements on some of
these variables for possible use in adjusting for differ-
2 $6.0 million 200 190
ences in cell characteristics. It was also felt that it might
be possible to learn something about the relationships
Complete information is not available on the distribu- between these variables and sales, and that this infor-
tion of spots over the six-month period, but it is known mation would be of assistance in planning the product
that about as many spots were run in the first two introduction into other markets.
months as in the next four months combined. The data are listed in Exhibit IV-1. Exhibit IV-2
The test design is summarized below. Treatment was presents a matrix of simple correlation coefficients.
held constant over the entire six-month period. Each cell Thus the correlation between the first two months sales
contained three stores. Each store was audited monthly. (S1) and price was ⫺.70.

Questions for Discussion

1. The correlation between price and sales is large and 3. Note that the intercorrelations between advertising
negative for all three time periods. What does this location and price are all zero. Why?
say about how price works? 4. Run regressions for each of the three sales variables
2. Explain the correlations between advertising and (S1, S2, S3) using P, A, and L as independent vari-
sales. What is happening to the advertising effect ables. What do these regressions imply about the
over time? effect of price? Of advertising? Of location?
91
5. Rerun the regressions adding the variables I and V. (the observed value) and the prediction made by the
Do your judgments about the effects of price, adver- model, that is, the intercept
tising, and location change? Why? plus P (24) times the price regression coefficient
6. If possible, obtain an output of residuals (differences plus A (0) times the advertising regression coefficient
between the model predicted Y and the actual Y). plus L (0) times the location regression coefficient
Check the residuals to identify observations that do plus I (8.3) times the income regression coefficient
not seem to fit the model. Why don’t they fit? For plus V (41) times the store regression coefficient
example, the residual for the second observation of 7. What additional regression runs, if any, should be
the S1 variable would be the difference between 323 made to complete the analysis of this data?

EXHIBIT IV-1

Average Unit Sales Per Month

Location (1 if
Instant Store $
First 2 Second 2 Last 2 Adv. (1 if High, Breakfast, Income Vol.
Months Months Months Price 0 Otherwise) 0 Otherwise) (000) (000)
S1 S2 S3 P A L I V City #

225 190 205 24 0 0 7.3 34 3

323 210 241 24 0 0 8.3 41 4
424 275 256 24 1 0 6.9 32 1
268 200 201 24 1 0 6.5 28 2
224 190 209 24 0 1 7.3 34 3
331 178 267 24 0 1 8.3 41 4
254 157 185 24 1 1 6.9 23 1
492 351 365 24 1 1 6.5 37 2
167 163 145 29 0 0 6.5 33 3
226 148 170 29 0 0 8.4 39 4
210 134 128 29 1 0 6.5 30 1
289 212 200 29 1 0 6.2 27 2
204 200 175 29 0 1 6.5 37 3
288 171 247 29 0 1 8.4 43 4
245 120 117 29 1 1 6.5 30 1
161 116 111 29 1 1 6.2 19 2
161 141 111 34 0 0 7.2 32 3
246 126 184 34 0 0 8.1 42 4
128 83 83 34 1 0 6.6 29 1
154 122 102 34 1 0 6.1 24 2
163 116 116 34 0 1 7.2 32 3
151 112 119 34 0 1 8.1 36 4
180 100 75 34 1 1 6.6 29 1
150 122 101 34 1 1 6.1 24 2

Mean
236 164 171 29 .5 .5 7.0 32

92
EXHIBIT IV-2

Matrix of Simple Correlation Coefficients

(S1) (S2) (S3) (P) (A) (L) (I ) (V)

(S1) 1 1
(S2) 2 .88 1
(S3) 3 .92 .90 1
(P) 4 ⫺.70 ⫺.73 ⫺.77 1
(A) 5 .12 .03 ⫺.16 0 1
(L) 6 .01 ⫺.04 .04 0 0 1
(I) 7 .18 .00 .34 ⫺.13 ⫺.75 0 1
(V) 8 .39 .30 .54 ⫺.18 ⫺.74 ⫺.04 .81 1

CHAPTER 23—CASE

CASE 23-1 microwave ovens were displayed: two were competi-

Brown Microwave tive models, one was the existing Brown design, and
the remaining two were the proposed Brown designs.
Brown Microwave was one of the leaders in the area of Each had very comparable features and specifications.
microwave ovens for the home, with about 15 percent The major difference was the cabinet.
of the market in 1997. Although microwave cooking had The plan was to bring the van into five cities
been around for many years, its use in homes was in a throughout the eastern United States, and in each city
major growth stage due to the replacement market. to recruit 100 women. The women would be recruited
Brown was considering two new cabinet designs from shopping areas near or connected to office build-
for its 1999 line of countertop microwave cookers. Both ings. The hope was to obtain a reasonable number (like
represented a sharp departure from the modern chrome 25 percent of the sample) of working women who
designs that had been available from Brown and its would be on a lunch break or would be shopping after
competitors. One was an “early American” design and work. The women would be asked to help evaluate
the other was made out of heavy dark wood and was some new kitchen appliances. A gift was promised for
more of a Mediterranean design. The concept was to participants. The cities would be selected from cities
add charm, warmth, and style to a product that had a frequently used as test markets.
“chrome-computer” image. The new design would add Each woman would be shown each of the five mod-
about 15 to 20 percent to the price of the unit. els. The common performance capabilities would be
The new designs would have to provide a net explained, but it would be emphasized that the major
increase of Brown’s sales of 15 to 20 percent to be con- difference was appearance and price. The price of each
sidered worthwhile. There would be a substantial would be noted on an attached sign. After the women
investment required to produce them, and their intro- saw the five models, they would be asked to indicate
duction would require a large percentage of the mar- their first, second, and third choices, assuming they were
keting budget and sales effort. buying such an appliance now. The following informa-
Before committing the company to one or both of tion also would be obtained regarding the respondents’
these designs, a product test was proposed. The con- status prior to exposure to the new models:
cept was to modify a large van so that half of it would
1. Did the respondents own a microwave oven?
simulate three kitchen segments. The segments would
2. If so, what type and make?
differ in the type of paneling and cabinets used. One
3. If not, were they familiar with microwaves and did
was dark, Mediterranean in appearance, another was
they plan to purchase one during the next year?
light-oak “early American,” and the third had a con-
temporary look. In this setting five counter-top
93
 After exposure to the new models: 3. Size of home or apartment? Rent or own?
4. Occupation?
1. What were their intentions of buying a microwave 5. What type of outlet would they go to if they were
oven during the next year? considering buying a microwave oven?
2. What were their age, education, income, and family
size?

Assignment

Evaluate the research design. Would you make any

changes? Plan a data analysis strategy.

CASE 23-2 distribution was obtained. Charley felt that a middle

National Chemical Corporation course might make sense. His idea was to distribute
the product through service stations and support it
The Tiger-Tread spray product designed to free cars with point-of-purchase display stands and brochures.
stuck in ice or snow had been delayed due to problems After all, the consumer did rely on the service station
with packaging. In the summer of 1996, the problems to provide antifreeze and other winterization services.
were solved and the product was ready to go. There Charley was evaluating a proposal from a local
were, however, a host of basic decisions that needed to marketing research firm to conduct a test market
be made, and Charley Omsrud was considering the through the coming winter in a snowbelt city of around
value of delaying a national introduction of the prod- two million people. The plan was to reach fleet owners
uct and running a test market. with the existing sales force and to reach individual car
One issue involved the amount of production owners through service stations supported by point-of-
capacity to plan both for the 5-oz can (good for two or purchase advertising. The cost would be $500,000 for
three use occasions) and the 10-oz can (good for four running the test and evaluating the results. Among the
to six use occasions). Although the 200 people from the outputs would be:
Toledo lab that tried product samples did not seem to
have problems using it, there was always the lingering 1. The percentage of households that
concern that unanticipated product problems could ■ Were aware of the product
materialize in a broader test. ■ Purchased the product
An issue that had recently emerged was whether ■ Made a repeat purchase
the market should be restricted to fleets of cars. A col-
2. The number and size of fleets that
league of Charley Omsrud, the marketing manager,
had observed that for every fleet car there were well ■ Were aware of the product
over 10 other potential customers. If a consumer ■ Were aware but did not order the product
effort were mounted, the nature of the marketing pro- ■ Ordered the product
gram needed to be decided. In the test market used ■ Ordered the product and made repeat purchases
in 1970, extensive information on advertising and 3. The type and incidence of any product problem

Questions for Discussion

1. What will be learned from the test? 3. What else would you like to know before making
2. What would you add or change about the test? a decision about the test?

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CASE 23-3 design. One proposal was to show 300 adult respon-
U.S. Department of Energy (B) dents slides of the six designs. Each design was to be
shown in three different scenes, a flat-land setting, a
The U.S. Department of Energy wanted to determine setting of hills, and a shore setting. The respondents
public attitudes toward six different windmill designs, were to be recruited from six locations, one of which
including the familiar old Dutch windmill design and was near a large working windmill.
more futuristic designs such as the Darrieus (eggbeater)

Questions for Discussion

1. Evaluate the research design. How would you 3. Would you use an evaluative scale or a paired or
select the cities and recruit the respondents? triad comparison?
2. How would you have them evaluate the six
designs (actually the 18 different slides)?

CASE 23-4 the F&B sector. As of now, the recycling project in

Hokey Pokey is Born in India Bangalore has been put on hold. Please pack up
and get on the next flight to Mumbai. I’ll expect a
It was a foggy Monday morning in early February 2008. memo with concrete suggestions within a week.
As Rohan walked into the breakfast cafe of the Leela Even in his previous job, Rohan had always wanted
Hotel in Bangalore, he was deep in thought about the to see how new products are developed and launched.
email he had just received from his boss back in the With The Ross Group being one of the leading private
United States. He had been in Bangalore, India for a equity firms in India, and with operations across several
week and was conducting due diligence for an invest- countries, he got hooked onto this challenge as he knew
ment in a recycling factory in the outskirts of town. He this would be a good canvas to see how things work.
gazed at the email on his laptop. The email and an However, he didn’t know where to get started from. He
attached report were from Raj, The Ross Group’s Chief then turned his attention to the attached report.
Operating Officer and Rohan’s boss: “Please pack up
and get on the next flight to Mumbai.”
Food & Beverage Industry Background
To: Rohan The Indian Food & Beverage sector is an estimated Rs. 4.66
From: Raj trillion market (US$105 billion), of which the ice cream
Subject: Hokey Pokey ice cream industry is an estimated Rs. 22 billion market (US$500
As a private investment group, you know that million) growing at a rate of 12 percent since 2001. Ice
we have been actively looking to pick up a stake cream consumption in India is much lower than other
in the Indian Food & Beverage (F&B) sector. I went countries with a yearly per capita consumption of 0.12
through the research report on the Indian F&B sec- liters. However, the majority of growth is attributed to an
tor compiled by our colleagues in Mumbai. The emerging middle class equipped with spending power.
team had also analyzed a business plan by a local The industry is divided into an unorganized and
Indian Chef’s new start-up company that would organized sector with 50 percent attributed to each.
focus on opening up ice cream parlors all over the Within the industry, there are two types of models, whole-
nation. The goal is to establish outlets throughout sale boxed and parlor retail, of which wholesale boxed
a metropolitan city and then rapidly expand all makes up the majority of the organized sector. Amul,
over India. I see this as a valuable opportunity to Kwality, and Vadilal are the three brands that dominate
enter this segment. I’m sure this opportunity to the fragmented wholesale boxed sector, which has yet to
enter into the F&B sector would not only provide see an international player successfully enter. The parlor
an excellent ROI possibility, but also enable us to retail model is divided amongst neighborhood parlors
diversify into the other product categories within like Bachelor’s ice cream in Mumbai, comprising the

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unorganized sector and international chains such as brownies, fudge, etc.) and customers would have the
Baskin Robbins. Pricing in the parlor retail model option to design their own creations. This concept had
varies drastically as the unorganized parlors tend to seen success in international markets such as the
price their product at a very cheap price due to lower United States and even other countries with similar
quality in the range of 10–15 Rupees. On the other end spending habits, such as the United Arab Emirates and
of the spectrum, offering higher priced items due to Singapore. Additionally, the concept would be served
better quality are gelato parlors, some of which are in a new age “lounge-like” atmosphere. During the
organized chains, and Baskin Robbins. Initially, when recent growth in the economy, Indian consumers have
Baskin Robbins entered the marketplace, their price spent more of their disposable income towards eating
point was averaging 80 Rupees. However, due to lack out than ever before. “Lifestyle concept” eateries such
of success, they have revamped their pricing structure as coffee shops were gaining in popularity and catered
to now average 55 Rupees. to the new emerging middle class. The business plan
focused on creating lifestyle parlors where a family or
Key Product Attributes group of young adults could “hang-out.” This type of
Product quality was a key focus and the goal was to make lifestyle parlor did not exist in a multi-chain format.
super premium ice cream locally. Ice cream quality is pri-
marily characterized by the percentage of fat content and The Product Launch
percentage of overrun that exists. Overrun is defined as The business plan called for the parlors to launch in
the amount of air that is trapped within the ice cream dur- Mumbai and then rollout to the rest of the country. As
ing the production process. When more air is trapped, part of a brand building exercise, the cosmopolitan city
there is more overrun and the quality of ice cream is lower. of Mumbai was chosen due to its significance as the
The four main categories of ice cream quality are econ- source of trendy and high quality products in India.
omy, standard, premium, and super-premium. Economy Many brands are viewed upon as favorable when they
brands tend to have minimal fat content, in the range of have success in Mumbai. Therefore, it was imperative
8–12 percent fat, and very high overrun (larger amount of that the brand be “born” in Mumbai. Hokey Pokey was
trapped air), around 120 percent. On the other end, super selected by the Chef in a brief survey he did with
premium brands have average fat content in the range of industry peers. He came up with a list of numerous
15–18 percent and overrun that ranges from 25–40 percent. names and asked his network of associates within the
F&B sector to vote. The winner was “Hokey Pokey,”
The Business Plan inspired by a slang term used in several areas of the
The business plan stated that there was great potential United States and parts of Great Britain in the 19th and
for growth in the Indian ice cream industry, specifically early-to-mid 20th centuries, to describe ice cream sold
in retail parlor outlets. The USP (unique selling propo- by street vendors. Ice cream street vendors were collo-
sition) was to offer high grade super premium ice quially referred to as “Hokey Pokey Men.”
cream in a distinct fashion from the way it had been As Rohan sat wondering about the efficacy of the
traditionally served in the country. The ice cream business plan, a lot of questions emerged. For his
would be mixed at the parlors on a frozen stone with memo to Raj he knew he needed answers to the fol-
mix-ins (assortments of nuts, candy bars, cookies, lowing questions

Questions for Discussion

1. Is there a market for ice cream in India? How can 4. What other cities within India should I looking at
I identify the market for a combined product— as a market for this product?
lifestyle and ice cream? Is the industry growth 5. Is Hokey Pokey a good brand name for this ven-
viable? ture? Is the Chef’s process of selecting the brand
2. What is the current competition in the Indian ice name correct? What other product names can I
cream industry? Is this an industry that can be suggest to Raj?
penetrated?
3. What is the scope for lifestyle eateries, will the This case was prepared by Rohan Mirchandani for
Indian audience be receptive to such a concept? the purpose of classroom discussion.
How can I assess the opportunity?

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