Chapter 4 Managing Marketing Information to Gain Customer Insights

Learning Objectives

1. Explain the importance of information in gaining insights about the marketplace and customers. 2. Define the marketing information system and discuss its parts. 3. Outline the steps in the marketing research process. 4. Explain how companies analyze and use marketing information. 5. Discuss the special issues some marketing researchers face, including public policy and ethics issues. Chapter Overview This chapter continues the exploration of how marketers gain insights into consumers and the marketplace. It looks at how companies develop and manage information about important elements of the marketplacecustomers, competitors, products, and marketing programs. To succeed, in todays marketplace, companies must know how to turn mountains of marketing information into fresh customer insights that will help them deliver greater value to customers. In order to build meaningful relationships with customers, marketers must first understand them and how they connect to brands. Thats were marketing research comes in. Chapter Outline 1.0 INTRODUCTION The Chipsy brand was introduced by Tasty Foods Egypt some twenty-five years ago. In partnership with Frito-Lay, the company produced the first packaged potato product in the country. Since its introduction, the brand has been the leading seller in the market. Over the years, they brand has developed a strong relationship with customers. The process began at the very beginning with extensive market research to discover customer needs and wants. Since then continued customer engagement has allowed the brand to develop new product lines and flavors. The brand has also be adapted to ensure that there are no concerns over matters such as the fat content or artificial flavorings. By ensuring that the company maintains a dialogue with the customers and understands their needs and concerns, the brand has continued to innovate and stay ahead of the competition. One of the key initiatives has been to target the older market with increasingly sophisticated flavors carrying premium prices. Whilst the brand is seen as being a brand for the masses, sub-brands have been created using the brand name Lays Delights to differentiate them from the standard range. Opening Vignette Questions

1. Do you have a meaningful relationship with your snack brands? Does anyone you know have such a relationship?

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2. How did Tasty Foods Egypt gain such deep insights into the underlying needs, emotions, and brand connections of Chipsy consumers? How did it apply these customer insights in the development of the Lays Delights range? 3. How does the Chipsy story relate to the major points made in the rest of the Managing Marketing Information chapter? 2.0 MARKETING INFORMATION AND CUSTOMER INSIGHTS In order to create value for customers and build meaningful relationships with them, marketers must first gain fresh, deep insights into what customers want and need. To gain good customer insights, marketers must effectively manage marketing information from a wide range of sources. Far from lacking information, most marketing managers are overloaded with data. In fact, most marketers say they dont need more information; they need better information. The real value of marketing research and marketing information lies in how it is usedin the customer insights that it provides. Therefore, many companies are creating customer insights teams to collect customer and market information from a wide variety of sources and use this information to develop insights that the company can employ to develop more value for its customers. Thus, companies must design effective marketing information systems that give managers the right informationin the right form, at the right timeand help them to use this information to create customer value and stronger customer relationships. A marketing information system (MIS) consists of people and procedures for assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights. 3.0 ASSESSING MARKETING INFORMATION NEEDS A marketing information system must balance the following: (1) the information users would like to have, (2) against what they really need, and (3) what is feasible to offer. The company begins by interviewing managers to discover what information they would like. Managers may omit things they ought to know, or they may not know what information they need to have. Therefore, the MIS must monitor the marketing environment to provide decision makers with information they should have. Sometimes the company cannot provide the needed information, either because it is not available or because of MIS limitations. Finally, the costs of obtaining, analyzing, storing, and delivering information can add up quickly. The company must decide whether the benefits of having the information outweigh the costs of getting it. 4.0 DEVELOPING MARKETING INFORMATION Marketers can obtain the needed information from internal data, marketing intelligence, and marketing research. 4.1 Internal Data Many companies build extensive internal databaseselectronic collections of consumer and market information obtained from data sources within the company network. Information in the database can come from many sources, such as the

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marketing, customer service, operations, and accounting departments. Internal databases can be accessed more quickly and cheaply than other information sources, but they also present some problems. The data may be incomplete or in the wrong form for making marketing decisions. Keeping the database current requires a major effort, because data ages quickly. Finally, managing the data requires sophisticated equipment and techniques. 4.2 Competitive Marketing Intelligence Competitivemarketingintelligence is the systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketplace. Good marketing intelligence can help marketers gain insights into how consumers talk about and connect with their brands. Companies also need to monitor the activities of competitors in an active way. The intelligence game goes both ways, so most companies are now taking steps to protect their own information. 5.0 MARKETING RESEARCH In addition to marketing intelligence about general consumer, competitor, and marketplace happenings, marketers often need formal studies that provide consumer and market insights for specific marketing situations and decisions. Marketingresearch is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. The marketing research process has four steps: defining the problem and research objectives, developing the research plan, implementing the research plan, and interpreting and reporting the findings. 5.1 Defining the Problem and Research Objectives Defining the problem and research objectives is often the hardest step in the research process. After the problem has been defined, the manager and the researcher must set research objectives. Exploratoryresearchintendsto gather preliminary information that will help define the problem and suggest hypotheses. Descriptive research aims to describe things, such as the market potential for a product. Causalresearchseeks to test hypotheses about cause-and-effect relationships. Managers often start with exploratory research and later follow with descriptive or causal research. 5.2 Developing the Research Plan The research plan outlines sources of existing data and spells out the specific research approaches, contact methods, sampling plans, and instruments that researchers will use to gather new data. Research objectives must be translated into specific information needs. The research plan should be presented in a written proposal. To meet the managers informationneeds,theresearchplanwillcallforgatheringprimarydata,secondary data,orboth.Secondarydata is information that already exists, having been collected for another purpose. Primary data is information collected for the specific purpose at hand. 5.3 Gathering Secondary Data

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Researchers usually start by gathering secondary data. The companys internal database is a good place to start. However, the company can tap into a wide assortment of external information sources. Using commercial online databases, marketing researchers can conduct their own searches of secondary data sources. Internet search engines can also offer help in locating relevant secondary information, but the keyword search process can be frustrating and inefficient. Secondary data can usually be obtained more quickly and at a lower cost than primary data. Secondary sources can also provide data an individual company cannot collect on its own. However, secondary data can cause problems. For example, the needed information may not exist. Even if it can be found, the information may not be usable if it lacks relevance (fits project needs), accuracy (reliably collected and reported), currency (up-todate), and/or impartiality (objectively collected and reported). 5.4 Primary Data Collection Secondary data can provide a good starting point, but the company often must collect primary data also. Researchers must make sure that the primary data is relevant, accurate, current, and unbiased. 5.4.1 Research Approaches

Primary data may be gathered through observation, surveys, and experiments. Observational Research. Observational research involves gathering primary data by observing relevant people, actions, and situations. Observational research can obtain information that people are unwilling or unable to provide. Many companies now use ethnographic research, which involves sending trained observers to watch and interact with consumers in their natural environment. Such research often yields the kinds of details that just dont emerge from traditional research questionnaires or focus groups. In addition, many companies now conduct Webnography research by observing customers in a natural context on the Internet. Survey Research. Survey research the most widely used method for primary data collection, is the approach best suited for gathering descriptive information. The major advantage of survey research is its flexibility, as it can be used to gather many different kinds of information in many different situations. However, survey research has some issues. Sometimes, people do not respond because they either cannot remember or have never thought about what they do and why they do it. Some people may not respond due to privacy issues, or they may be too busy to respond. Experimental Research. Best suited for gathering causal information, experimental research involves selecting matched groups of subjects, giving them different treatments, controlling unrelated factors, and checking for differences in group responses. Thus, it seeks to explain cause-and-effect relationships. 5.4.2 Contact Methods

Information can be gathered by mail, telephone, personal interview, or online.

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Mail, Telephone, and Personal Interviewing. Mail questionnaires can be used to collect large amounts of information at a low cost per respondent. Respondents may respond more honestly to personal questions, and no interviewer is involved to bias the respondents answers. However, these instruments are inflexible; they take longer to complete and the response rate is low; and the researcher often has little control over the population the questionnaire is attempting to sample. Telephone interviewing is the one of the best methods for gathering information quickly. It provides greater flexibility than mail questionnaires, interviewers can explain difficult questions, and response rates are higher than with mail questionnaires. However, the cost per respondent is high, people are reluctant to discuss personal matters, and the method introduces interviewer bias. Personal interviewing takes two forms. Individual interviewing involves talking with people one-on-one. Such interviewing is flexible, but it can cost three to four times as much as telephone interviews. Group interviewing consists of inviting six to ten people to meet with a trained moderator to talk about a product, service, or organization. The moderator encourages free and easy discussion, but focuses the discussion at the same timehence the name focus group interviewing. Such groups have become one of the major qualitative marketing research tools for gaining fresh insights about consumers. However, because they employ small samples, it is hard to generalize from the results; moreover, participants may not be open and honest in front of other people. Online Marketing Research. Increasingly, researchers are collecting primary data through online marketing research. Global marketing research spending reached an estimated $4.5 billion last year and is growing at 1520 percent annually. The Internet is well suited to quantitative researchconducting marketing research and collecting data. Web-based survey research offers some real advantages over traditional phone, mail, and personal interviewing approaches. The most obvious advantages are speed and low cost. Researchers are also adopting qualitative web-based approaches, such as online interviews, focus groups, blogs, and social networks. A primary qualitative web-based research approach is online focus groups because they are low in cost, easy to administer, and offer almost instant results. However, such groups can lack the real-world dynamics of more personal approaches, and it is hard to control who is in the group if respondents cannot be seen. Todays marketing researchers are going beyond well-structured online surveys, focus groups, and web communities. Increasingly, they are listening to and watching consumers by mining the rich veins of unsolicited, unstructured bottom up customer information already coursing around the web. Perhaps the most significant concern over such methods has to do with the privacy of consumers. Failure to address privacy issues could result in angry, less-cooperative consumers and increased government intervention. 5.4.3 Sampling Plan

A sample is a segment of the population selected for marketing research to represent the population as a whole. The ideal sample will be representative so that researchers can make accurate inferences about the thoughts and behaviors of the larger population. Designing the sample requires several decisions. Who is to be surveyed (what sampling unit)? How many people should be surveyed (what sample size)? How should people in the sample be chosen (what sampling procedure)?

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5.4.4

Research Instruments

In collecting primary data, researchers have two main choices: the questionnaire or mechanical devices. Questionnaires. The questionnaire is the most common data collection instrument. Closed-end questions include all the possible answers, and subjects make choices among them. Such questions provide easy-to-interpret answers. Open-end questions allow respondents to answer in their own words. Such questions are useful in exploratory research, when the researcher is trying to discover what people think but is not trying to measure how many people think a certain way. Researchers must use care in the wording and ordering of questions. Mechanical Instruments. Researchers also use mechanical instruments to monitor consumer behavior. Nielsen Media Research attaches people meters to TV sets and cable boxes in selected homes to measure who watches which programs. Retailers use checkout scanners to record shoppers purchases. Other mechanical devices measure subjects physical responses to various media. Still other researchers are applying neuromarketing by measuring brain activity with MRI scans and EEG devices to learn how consumers feel and respond. 5.5 Implementing the Research Plan

The researcher next puts the marketing research plan into action. This involves collecting, processing, and analyzing the information. Researchers should watch closely to make sure that the plan is implemented correctly. They must also take the following actions: process and analyze the collected data to isolate important information and findings, check the data for accuracy and completeness, code it for analysis, tabulate the results, and compute statistical measures. 5.6 Interpreting and Reporting the Findings

Researchers should present important findings and insights that are useful in the major decisions faced by management. However, researchers should not be the only ones to interpret the findings. Rather, managers and researchers should work together closely when interpreting research results, and both must share responsibility for the research process and resulting decisions. 6.0 ANALYZING AND USING MARKETING INFORMATION Once the information has been processed and analyzed, it must be made available to the right decision makers at the right time. 6.1 Customer Relationship Management (CRM) Most companies are awash in information about their companies. In fact, smart companies capture information at every contact (touch point) between customer and company. Customer relationship management (CRM) is used to manage detailed information about individual customers and carefully manage customer touch points in order to maximize

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customer loyalty. CRM integrates everything that a company knows about individual customers to provide a 360-degree view of the customer relationship. A data warehouse is a companywide electronic database of finely detailed customer information that needs to be sifted through for gems. Data mining is the use of high-powered techniques to sift through the mounds of data and dig out interesting findings about customers. The results often lead to marketing opportunities. The use of CRM can help companies understand their customers, provide higher levels of customer service, and develop deeper customer relationships. However, technology alone cannot build profitable customer relationships, so CRM is just one part of an effective overall customer relationship management strategy. 6.2 Distributing and Using Marketing Information Marketing information has no value until it is used to gain customer insights and make better marketing decisions. Thus, the marketing information system must make the information readily available to managers and others who need it. Many firms use a company intranet and internal CRM systems to facilitate information distribution. The internal information systems provide ready access to research findings, customer contact information, shared work documents, contacts for employees and other stakeholders, and more. Companies are increasingly allowing key customers and valuenetwork members to access account, product, and other data on demand via extranets. 7.0 OTHER MARKETING INFORMATION CONSIDERATIONS This section discusses marketing information from several viewpoints: small businesses and nonprofit organizations, international business, and public policy and ethics. 7.1 Marketing Research in Small Businesses and Nonprofit Organizations Managers of small businesses and nonprofit organizations often think that only experts in large companies with big research budgets can do marketing research. However, smaller organizations can use many of the research techniques discussed in this chapter, in a less formal manner at little or no expense. Small businesses and nonprofit organizations can obtain marketing insights by observing things around them. Managers can conduct informal surveys using small convenience samples. In addition, many associations, local media, and government agencies provide special help to small organizations. Finally, small businesses can gather considerable amounts of information at very little cost online. Although these informal research methods are less complex and costly, they still must be conducted with care. 7.2 International Marketing Research International marketing researchers follow the same steps as domestic researchers. However, these researchers often face more and different problems. Domestic researchers deal with relatively homogenous markets within a single country; international researchers deal with diverse markets in many different countries. International researchers have trouble finding good secondary data, so they often

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must collect their own primary data. U.S. researchers can reach most respondents by phone, mail, online, or in person. Reaching respondents is often not easy in other parts of the world. Cultural differences from country to country cause additional problems for international researchers. Language is the most obvious obstacle. International consumers also vary in their attitudes toward marketing research. Some may be very willing to respond; some may not even consider it.

Despite these problems, as global marketing grows, companies will have little choice but to conduct international marketing research. 7.3 Public Policy and Ethics in Marketing Research Most marketing research benefits both the sponsoring company and its consumers. However, the misuse of marketing research can also harm or annoy consumers. 7.3.1 Intrusions on Consumer Privacy

Many consumers feel positive about marketing research. However, some strongly resent or even mistrust marketing research. Increasing consumer resentment has become a serious problem for the marketing research industry, leading to lower survey response rates in recent years, as consumers wrestle with the trade-offs between personalized products and personal privacy. The marketing research industry is considering several options for responding to this problem, such as educating consumers about the benefits of marketing research and codifying researchers responsibilities to respondents and the general public. If researchers provide value in exchange for information, most consumers will provide it. In the final analysis, the best approach is for researchers to ask only for the information they need, to use it responsibly to provide customer value, and to avoid sharing information without the customers permission. 7.3.2 Misuse of Research Findings

Many research studies appear to be little more than vehicles for pitching the sponsors products, based on the findings of blatantly self-serving research surveys. Recognizing that surveys can be misused, several associationsincluding the American Marketing Associationhave developed codes of research ethics and standards of conduct. Even so, unethical research practices cannot simply be regulated away. Therefore, each company must be held accountable for policing the conduct and reporting of its marketing research activities, in order to protect consumers best interests and its own. Student Exercises 1. Key Term: Internal Database

Internal databases are electronic collections of consumer and market information obtained from data sources within the company. In todays highly competitive environment, educational institutions are striving to provide better service and be more responsive to the various publics it serves. How does your college or university use internal databases in its effort to provide better quality service to students?

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2.

Key Term: Marketing Research

Suppose that you are in charge of marketing research for In-N-Out Burger (www.in-nout.com). What are the two types of information you would be interested in having available to you? 3. Key Term: Secondary DataExternal Information Sources

Companies can turn to many external information sources in an effort to secure needed secondary data. The U.S. Census Bureau (www.census.gov) provides detailed statistics and trends about the U.S. population. Name several categories of information that can be obtained at the Census Bureau and cite a specific example of each category. 4. Key Term: Survey

Survey research is the most popular method for primary data collection. It is the approach best suited for gathering descriptive information. Increasingly, marketers are turning to online resources to survey consumers. Check out Zoomerang (www.zoomerang.com) and SurveyMonkey (www.surveymonkey.com). Write up a brief comparison of those two sites that includes costs, features, and ease of use. 5. Key Term: Focus Groups

Focus groups allow marketers to gain insights into consumer thoughts and feelings. If you were in charge of marketing for Papa Johns Pizza (www.papajohns.com), would you use focus groups to give you insight into your customers? Why or why not? 6. Key Term: Sample

You cant survey everyone. Due to this, marketers typically draw conclusions about the market as a whole by studying a representative sample of the population. Imagine that your school is considering whether to offer an online degree program for business administration students. Your job is to survey relevant individuals about their feelings regarding this. What factors must you consider as you determine who to sample, how many people to sample, and how you will administer the sample? 7. Key Term: Questionnaire

Suppose you are in charge of administering a questionnaire for Amlis French Bakery (www.ameliesfrenchbakery.com) in the NoDa Arts District of Charlotte, NC. What would be your preferred method for delivering the questionnaire to new and prospective customersin person, online, by mail, or by phone? Why would you choose that method over the others? 8. Key Term: Data Mining

Data mining is the process of sifting through mounds of data to dig out interesting findings about customers. These findings can then be used as the basis of future marketing endeavors. How might Harrahs Entertainment (www.harrahs.com), the worlds largest casino operator, use data mining? 9. Key Term: Small Business Marketing Research

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Small businesses can benefit from marketing research. However, many of them cannot afford the formalized marketing research programs of the larger corporations. A friend of yours is contemplating opening a new coffee shop close to your campus and has turned to you for insight on conducting marketing research. How would you advise your friend? 10. Key Term: Consumer Privacy

Online marketers track and analyze consumers web clicks and target ads to individuals based on their browsing and social networking behavior. As a consumer of products and services and a user of online services, do you feel that such market research tactics are invading your privacy? Put your thoughts into writing, being sure to support your position with specific examples and relevant details. Marketing ADventure Exercises 1. Ad Interpretation Challenge: Customer Insights Ad: Entertainment TechnologyApple iPod

Customer insights are fresh understandings of customers and the marketplace derived from marketing information that can become the basis for creating customer value and relationships. Consider the Apple iPod. How did Apple use customer insights to create this digital music player? 2. Ad Interpretation Challenge: Internal Databases Ad: ApparelBarneys

Internal data is that information obtained from data sources within a companys network. It is information based on current customers. This information may include anything from their purchases over the past year to attitudinal data on likes and dislikes. Look at the ad for Barneys on p. 125 in your textbook. How might a review of this companys internal data have led to the creation of this ad? 3. Ad Interpretation Challenge: Primary Data Ad: Food and BeveragesRed Bull

In an effort to leverage its strong brand position, Red Bull is considering entry into the market for vitamin-enhanced water (see p. 128 in your textbook). Before entering this market, Red Bull will need to gather primary research data to address questions such as the following: Do current customers also consume enhanced-water products? Are such products consistent with their lifestyles? Would Red Bull need to target a new segment of consumers? As a member of Red Bulls marketing department, your assignment is to gather primary data to answer those questions. Consider Table 4.2 on p. 130 in your textbook and decide on the research approach, contact method, sampling plan, and research instrument you plan to use. Why will the decisions you made help you gather primary data that will be relevant, accurate, current, and unbiased? 4. Ad Interpretation Challenge: Competitive Marketing Intelligence Ad: Online Monitoring ServiceRadian6

Competitive marketing intelligence is the systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketing

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environment. Radian6 provides a platform that allows companies to monitor consumers online chatter, thereby tracking trends and responding better to customers online. Visit Radian6 (www.radian6.com) and Trackur (www.trackur.com) and compare their opening webpages. How are the webpages similar? How are they different? 5. Ad Interpretation Challenge: Ethnographic Research Ad: Student Choice

Ethnographic research is a form of observational research that involves sending trained observers to watch and interact with consumers in their natural habitat. Browse the Internet to locate an ad that you believe may have been based on ethnographic research. What made you choose this ad? 6. Ad Interpretation Challenge: Contact Methods Ad: Food and BeverageSchick Slow Sip Sessions

Immersion groups are small groups of consumers who interact directly and informally with product designers without a focus group moderator being present. Schick Canada designed Slow Sip sessions to simulate simple get-togethers with girlfriends at a local caf (see p. 135 in your textbook). Visit e-FocusGroups (www.e-focusgroups.com) and Schlesinger Associates (www.schlesingerassociates.com). Based on what you see at these sites, do you think that Schick could use these services to conduce immersion-group sessions online? Why or why not? 7. Ad Interpretation Challenge: Online Marketing Research Ad: Listening OnlineReal Marketing 4.2

According to the Real Marketing 4.2 feature in this chapter, marketers now employ sophisticated web-analysis tools to listen in on and mine nuggets from the churning mass of consumer comments and conversations in blogs, in news articles, in online forums and on social networking sites (see p. 139). Advocates claim that targeting the online behavior of consumers benefits them by giving them ads and products that are relevant to their interests. Detractors assert that consumers are being stalked online and that their personal privacy rights are being violated. What is your point of view on this issue? Be sure to support your position with relevant facts, examples, statistics, or other evidence. 8. Ad Interpretation Challenge: Marketing Research in Small Business Ad: Dry CleaningBibbentuckers

According to your textbook (p. 146), Bibbentuckers is a high-end dry cleaning company that is positioned on high-quality service and convenience. You can visit Bibbentuckers online at (www.bibbentuckers.com). How could this company use its website to build a database of actionable insights into customers buying patterns? 9. Ad Interpretation Challenge: International Marketing Research Ad: Global InformationNielsen

The demand for international marketing research has never been higher. While international researchers follow the same steps as domestic researchers, they often face more and different problems. The Nielsen Company is headquartered in New York, NY. As the worlds largest marketing and research company, it has offices in more than 100 countries (see p. 147 in your textbook). How does Nielsens global presence help it to

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address the problems noted in your textbook that are associated with gathering marketing research?

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