Course Introduction,Backward Market Research, Market Research Ethics

Market IntelligenceJulie Edell BrittonSession 1 August 7, 2009

Todays AgendaCourse Overview: The Big PictureSome course detailsResponsibilities & EthicsIntroduction to Backward Market Research

Who am I? Education: Ph.D., M.S., Graduate School of Industrial Administration, Carnegie-Mellon University; B.A. University of Nebraska in math

Teaching: Fuqua in 1980, CRM, Mkt Intelligence, Consumer Behavior, Statistics, Mkting Mgmt, Research: Consumer cognitive and emotional response to marketing actions

Favorite Sports: Duke Basketball, Nebraska Football (American), Soccer Family: Married with 6 children, aged 20 29; 3 boys, 3 girls, 2 grandchildren and 2 cats

Who are You?Name CityCompanyJob FunctionFamilyWhat you do for fun

Todays AgendaCourse Overview: The Big PictureSome course detailsResponsibilities & EthicsIntroduction to Backward Market Research

John Doerr - PC GuruThere are basically four risks we have to confront in each deal. There is technical risk: Can we split the atom? There is people risk: Will the key players on the team stay together? There is financial risk: Can we keep the company well financed? And there is market risk: Can we get the dogs to eat the dog food? The most dangerous of these risks is market risk. Removing market risk is expensive were risk takers but we will take a technology risk over a market risk any day of the week. (Perkins & Perkins, 1999, The Internet Bubble, p. 74)

Termmarket risk used differently here: he means uncertainty around demand. In economics we have upward sloping supply downward sloping demand and where the 2 meet determine the quantity of the market. So we mean uncertainty around the demand curve. Sometimes not a lot of big deal if its a product thats hasnt changed in 15 years, standard consumption patterns. not a place where lots of decisions need to be made

Big decisions that will make or break your career are made around new products, product changes, new ideas. Where you dont have a history of quantity and price data to estimate a demand function and pull out an elasticity. How do you know how big the market will be? We will give you tools in this class to shrink the market risk.

Market Intelligence: 3 SkillsBackward market research: Imagine the end of the processIdentify analysis to support choice among alternatives and determine what information / variables would be needed for the analysisGet the data needed for the analysisAnalyze data & make recommendationGetting data & judging its qualityTools for classic marketing problems

Big goal is to help you develop tools to reduce market risk, uncertainty around demand. There are 3 skills for you to take away.

Bmr, we hope it changes the way you think about collecting and interpreting data. you need to discern the quality. If its imperfect data, how can you rescue it. If it needs rescuing. All data imperfect.

Break Identify analysis into

Identify analyses to decide between alternativesDetermine information needed for analyses

3 Key SkillsBackward market research (1,2)Getting data, judging its quality & analyzing (2-6)Analysis frameworks for classic marketing problemsConjoint analysis for new product forecasting (7)Segmentation (8)Promotion Analysis (9)Simulated Test Markets (9,10)

This course is designedfor users of market intelligence in consulting, marketing management, entrepreneurship, finance help you avoid drowning in datahelp you become a more sophisticated user by assuming role of research provider and by providing practice as evaluator of researchimprove your ability to use imperfect information to make decisions

Anyone planning to use market research (not doing it). We will have you take on role of research provider so that youll be better at using mkt res when it comes at you, not to prepare you for that career.

If you only get to the point of recognizing flaws, thats a problem. Then you stop there. But all data is imperfect. so need to know when you can deal with it and rescue.

Random errors versus a bias (consistently too high or too low). Maybe oversampled people who are likely to be targets, so you have a high estimate. Not just identify bias. But identify direction of the bias. Imagine we look at numbers for new product and it comes back as no go. But then they realize data is flawed, so should you just say we cant use it so we dont know if we should go or not? No, see direction. If its biased in the direction of overestimating demand, then youre even more confident in the no go decision. So despite the flaw, youre able to move ahead. Of course, correcting for bias could make you less certain. This seems obvious but its a very rare skill. People are good often at finding problems, but not good at figuring out how to move ahead despite the problems. They ignore research entirely

Highlight drowning in data and fact that knowing which few numbers you need in some massive database keeps you from wasting days and from getting so confused that you miss the key details.

decisions relating toSegmentation: choosing a base, analysis New products:Beginning with exploratory (e.g., focus groups) Scientific methods for new product concept screening: surveys, conjoint analysis, simulated test marketsPricingPromotion

We will go through the entire new product development process during the class, not all at once but at end youll realize weve covered all aspects. All of these here, its about estimating demand and reducing market risk.

Todays AgendaCourse Overview: The Big PictureSome course detailsResponsibilities & EthicsIntroduction to Backward Market ResearchSet up Southwestern Conquistador Beer case

Class Tools Readings Course PackCases Almost every classText Essentials of Marketing Research, 2nd Edition, Kumar, Aaker and Day (KAD)Data Analysis SPSS Statistics 17.0

TA for Market IntelligenceStephen Spiller(SPSS Help)

AssignmentsSubmit using online submission tool on the platform. Follow submission deadlines on the platform. Major Team Cases: WEMBA A, WEMBA C Daily cases:Team cases: Southwestern Conquistador Beer and WEMBA BIndividual or Team (or Team Subset) - all others

Class participation (10%)Use your tent card daily. Be in class and prepared every dayI will cold-call. Email me if you will be absent or unable to prepare for a class I will avoid calling on you one day during the term. Minor cases (15%) Southwestern Conquistador Beer with your team, National Insurance,Colgate Oral Care, WEMBA B with your team, IBM Global MobileComputing, and Nestle Refrigerated Foods: Contadina Pizza and PastaMajor team cases (40%) WEMBA A and WEMBA CMidterm exam (35%) To be taken between Sessions 6 and 7 by 9/16

Fuqua Grade Distribution for electives: no more than 30% SP, 45% HP, and at least 25% P, LP, and F.Grading

Be jokingly menacing about the cold call and the need to have a good analysis. We want them to be on their toes. Suggest to them that it is not a good idea to divide and conquer on the cases and that they shouldnt put their names on the case if they didnt contribute. Well cold call one individual, and if you d

Honor Code Violations

Lying: Lying includes, but is not limited to, communicating untruths in order to gain an unfair academic advantage.Cheating: Cheating includes, but is not limited to, using unauthorized materials to complete an assignment; copying the work of another person; unauthorized providing of material or information (e.g., proprietary course information) to another person; using the work of another without giving proper credit (e.g., plagiarism); and working on course material outside of the time constraints imposed by the instructor.

Honor Code ViolationsStealing: Stealing includes, but is not limited to, taking the property of another member of the Duke Community without permission, defacing or vandalizing the property of Duke University. Failure to Report: Any party having knowledge of an Honor Code violation without reporting it will be considered an accessory to the violation and subject to penalty if found guilty.

Honor Code Applied to Marketing IntelligenceGraded exams, cases, assignmentsDont consult old exams and cases or solutions or people who have done themPut your name on cases submitted by your team only if you contributed materially to the solution

Class Schedule Sat. 8/8 - Problem definition & information needs, Secondary data Hypothesis formulation & elementary data analysis and reporting.Read: KAD Ch 4, 5, 12 (pp. 361-366) and Whats Behind the Numbers?Case Discussion Southwestern Conquistador Beer

Fri. 8/21 - Database hypothesis testing exercise, Identifying customer needs, SPSS Tutorial Read: KAD pp. 384-390, The Elaboration Model. (pp. 402-403), Review SPSS online Tutorial and Help Session handout.

Sat. 8/22 - Intro to survey research, MeasurementRead: KAD pp. 178-191; 197-202; 209-229; 247-266; and Comparative Advertising: Measurement Scales and Data AnalysisCase Discussion - National Insurance

Fri. 9/4 Focus Groups, Questionnaire design, Survey samplingRead: KAD pp. 283-290; 306-316; Conducting the Focus Group, andThoughts on Qualitative ResearchCase Discussion Colgate Oral Care Focus Group

Class Schedule Sat. 9/5 Causal Research and ExperimentsRead: KAD pp. 97-101Case Discussions Milan Foods SPSS Sampling Assignment (no slides) and Wall Street Journal/ Harris Interactive Survey of MBA Program Recruiters (no slides)

Fri. 9/25 New Product Concept Screening and Conjoint AnalysisRead: Factorial Designs, pp. 357-359 and Conjoint Analysis: A Managers GuideCase Discussion WEMBA B and Entitle Direct Title Insurance (no slides)

Sat 9/26 Market SegmentationRead: Segmenting Markets including the appendixCase discussions Cola Exercise and IBM Mobile Computing

Class Schedule Fri. 10/9 Regression analysis for promotion analysis, Debrief WEMBA C Case, Simulated Test MarketsRead: Regression Analysis Applied to Sales Promotion, and Its Better to Fly a Simulator Than Crash the Real Thing

Sat 10/10 Course Wrap-UpCase discussions Nestle Refrigerated Foods: Contadina Pasta and Pizza (A)

Other Important Dates9/3 8 pm Colgate Case Slides Due9/16 8 pm Mid-Term Exam Due9/20 8 pm WEMBA A Team Case Write-up Due9/24 8 pm WEMBA B Team Case Slides Due9/25 10 pm IBM Global Mobile Computing Case Slides Due10/8 10 pm WEMBA C Team Case Write-up Due10/10 8 am Nestle: Contadina Pasta Case Slides Due

Questions

Todays AgendaCourse Overview: The Big PictureSome course detailsResponsibilities & EthicsIntroduction to Backward Market Research

Responsibilities3 Parties in the Research Process:Client (User, Sponsor)Supplier (Market Research Firm, Provider) Respondent (Customer, Subject)

Respondents Rights (for primary research)Privacy (informed consent)SafetyBe informed of research purposeLearn of research results

In b-to-b research, the last 2 are relevant. Only will participate if you provide them with summary and tell the purpose.

This course is about collecting and using data. We want you to be able to sleep well at night.

Clients ResponsibilitiesTo respondents: avoid using respondent list for sales leadsavoid deception (no sugging or frugging)

To suppliersAvoid dishonesty (free-riding)Provide accurate inputs to research

To business partners, investors, colleagues: Decision research, not advocacy researchNon-zero value of information

Need to protect rights of respondents. Some obvious ones: Sugging: sales under guise of research. Frugging: fundraising under the guise of researchDo not call lists: wont get called for sales. But dont bar research firms to call you. So sometimes people avoid this by using research to get salesSecond point: most important one maybe, very important.Advocacy research: cooking the books to deceive others to go along with action you want to take. When you did research, there was no chance that any other action would be taken.

Decision research: outcome can influence decision you make.Value of information (alluded to in chapter, in decision models class) if you made a decision without a certain piece of info, you have subjective prob that outcome will be x vs y. You can figure out expected value of best decision without info. If theres additional info you could pay for, how would that change decision? If expected value of decision without info is equal to value of expected value of decision you would make without info, you shouldnt pay for research b/c it doesnt affect decision.

Suppliers can be from within firm or outside. Bring consultants to pitch and see how would you do it? Then they leave and they do it on their own.

Assumptions that models of demand forecasts come from you.

*Contadina: simulated test market very accurate if assumptions are accurate. Estimate what fraction of overall market will trial? What proportion who tries will repeat? Based on this pretty accurate. Part of what goes into it is level of awareness (how much you plan to spend on advertising) and distribution in the marketplace (salesforce youre going to put behind it). If you spend half of that, its lower awareness.

Consider omitting delicare story or cutting part about Clancy guest speaker under provide accurate inputs.

Nonzero Value of InformationMany managers use Market Research the way a drunk uses a light pole more for support than illumination

Decision Research = Nonzero Value of Information

Suppliers ResponsibilitiesClient confidentialityFreedom from conflict of interestProper execution of researchTechnically soundLimitations disclosedMeet time and $ budget agreed upon

They cant expose your trade secretsAll research has limitations but not all intell firms are good about telling you upfront what you can and cant say based on findings

Approaches to EthicsDeontological versus Consequentialist

You are the market research director of a pharmaceutical company, and the executive director suggests to you that company interviewers telephone physicians under the name of a fictitious market research agency. The purpose of the survey is to help assess the perceived quality of the companys products.

Want to analyze cases. But first, one more thing to throw in front of you. There are 2 broad frameworks to analyze cases you had.Deontological approach: a moral analysis. Hierarchy of moral principles. You will not violate highest of these no matter what. I never lie to anyone I deal with in business so off the table. Conflicts: different moral principles point to x versus y. What do you do?Consequentialist: what are the consequences of doing x versus y. In terms of who is affected and how are they affected? I might be wiling to harm you if it does the greatest good for the greatest number of people. Look at all parties involved.Read pharmaceutical example, cold call. How would you start thinking about this dilemma? (point out whether its deon or cons). Someone else may have different set of moral standards, will differ.Cold call: think of this from conse. Perspective. Who are parties affected? Implied alternative is that you tell them who you are. (presuming that if you told them your identity theyd be biased and you wouldnt know if you had a problem, distributors would be better off). Other people affected? How are they affected by this decision, whether youre straight with them or tell them the lie. (implicit in that: they find out. But if its super unlikely they find out, you weigh that in too). Take that and decide how to balance against how much it would help end consumers.Each decision has its downsides, hard to decide what to do. Were thinking of A vs. B. Sometiems it helps to think is there an Action C were not considering? What about here? (actually hire a 3rd party to do research).

Ethical Dilemma 3John Rider is the Senior VP at ESPN The Magazine. His background is in publishing, running Spin and Rolling Stone magazines, each of which is targeted at young male readers. He describes the process of designing and launching ESPN The Magazine. He chose age as a strategic basis for segmentation and chose to design a sports magazine for 18-34 year old men. The key to his strategy is the fact that he is actually selling to two markets readers of sports magazines and advertisers. Most of his revenue is to come from the latter. Advertisers will pay a premium to have a highly targeted vehicle to reach

Ethical Dilemma 3 (Cont.)the young male audience. For this all-important advertiser market, ESPN The Magazine is more attractive if it loses older customers and builds circulation among young men. The other mix element that these advertisers are sensitive to is respectability. Sports magazines are respectable. The alternative, highly targeted vehicles for reaching young men tend to be not-so-respectable music and sex magazines. Thus, ESPN The Magazine would deliver the benefits these advertisers sought.

Ethical Dilemma 3 (cont.) He is convinced of the ESPN The Magazine concept, but his bosses at ESPN are skeptical. Rider reports that he used relatively little research in launching his magazine. He relied on syndicated research showing the aging characteristics of the Sports Illustrated franchise, he ran focus groups, and he did very limited concept testing in which he showed the mock-up magazine to target readers. He confides that this limited research was more for his bosses consumption than for his own enlightenment. Sometimes you do a research study to convince your bosses that you are right.

Ethical Dilemma 1Jim Horsky, a marketing manager at Bell Atlantic wanted to develop a logical portfolio of access solutions for a Custom Select offering: The manager and internal research supplier sought to build a model that allows Bell Atlantic to simulate revenue and profit streams for all permutations of price and access combinations being considered, thus enabling the selection of the profit-maximizing solution. The process

Ethical Dilemma 1 (cont.)was to identify 5 research suppliers and ask them to bid on the project. Typically, Bell Atlantic would ask 2-3 suppliers to bid, but Horsky had several new managers on board and he wanted to train them to develop their ability to manage the research process. The suppliers each developed bids and research proposals, all of which were presented to Bell Atlantic managers back-to-back in a single grueling day.

Ethical Dilemma 2Bell Atlantic develops long term relationships with research suppliers. A key research supplier drops Bell Atlantic and takes a large account with Sprint.

whos worked in consulting? Of you, how many have had multiple clients in same industry? How did you handle it? Part of the reason you go with them in the first place is b/c they have expertise in this industry. So its natural. So expertise can transfer. But whats not transferred is data about other firms. In some cases, its understood that youll work for competitors and theyre ok. Sometimes firms dont like that so they can put it in contract.You can structure it different ways, so its ethical or unethical. What are prior agreements? Parties must be informed about what deal is. Notice irony? Irony: from same dinner conversation as ED2. you can treat your business partners in transactional way or relational way. If one thinks its relational but other thinks its transactional, that can create problems.In this situation, they did not inform people before so it wasnt that ethical bad for either new or old suppliers.If not in contract its ok.

Q: How to fix it?A: Put it in contract.

ConclusionsUnderstand the ethical responsibilities of the client (thats you!) and recognize behaviors that might amount to a failure to honor those responsibilities.

Understand what behaviors are not unethical, though they seem on the surface to clash with an ethical responsibility.

Generate creative solutions to ethical dilemmas that serve your ethical principles while still doing what seems to be in the best interest of ones firm. Key is often whether the other parties are informed of facts that would cause them to change their investment in activities with you, the client.

Unethical behavior can produce negative consequences for the client and the firm in the long run.

People always say you cant teach ethics, b/c people have their own moral principles and you cant assume theyre the same or put your own on others.

RecapThis course is for users of market researchLots of moving parts, but platform will help you keep track of thingsResponsibilities & EthicsRecognize affected parties, Seek 3rd alternative when apparent ethical conflicts arise

Next time: SWC Beer, Backward Market Research, Secondary data, Hypotheses formulation

Termmarket risk used differently here: he means uncertainty around demand. In economics we have upward sloping supply downward sloping demand and where the 2 meet determine the quantity of the market. So we mean uncertainty around the demand curve. Sometimes not a lot of big deal if its a product thats hasnt changed in 15 years, standard consumption patterns. not a place where lots of decisions need to be made

Big decisions that will make or break your career are made around new products, product changes, new ideas. Where you dont have a history of quantity and price data to estimate a demand function and pull out an elasticity. How do you know how big the market will be? We will give you tools in this class to shrink the market risk.Big goal is to help you develop tools to reduce market risk, uncertainty around demand. There are 3 skills for you to take away.

Bmr, we hope it changes the way you think about collecting and interpreting data. you need to discern the quality. If its imperfect data, how can you rescue it. If it needs rescuing. All data imperfect.

Break Identify analysis into

Identify analyses to decide between alternativesDetermine information needed for analyses

Anyone planning to use market research (not doing it). We will have you take on role of research provider so that youll be better at using mkt res when it comes at you, not to prepare you for that career.

If you only get to the point of recognizing flaws, thats a problem. Then you stop there. But all data is imperfect. so need to know when you can deal with it and rescue.

Random errors versus a bias (consistently too high or too low). Maybe oversampled people who are likely to be targets, so you have a high estimate. Not just identify bias. But identify direction of the bias. Imagine we look at numbers for new product and it comes back as no go. But then they realize data is flawed, so should you just say we cant use it so we dont know if we should go or not? No, see direction. If its biased in the direction of overestimating demand, then youre even more confident in the no go decision. So despite the flaw, youre able to move ahead. Of course, correcting for bias could make you less certain. This seems obvious but its a very rare skill. People are good often at finding problems, but not good at figuring out how to move ahead despite the problems. They ignore research entirely

Highlight drowning in data and fact that knowing which few numbers you need in some massive database keeps you from wasting days and from getting so confused that you miss the key details.We will go through the entire new product development process during the class, not all at once but at end youll realize weve covered all aspects. All of these here, its about estimating demand and reducing market risk.

Be jokingly menacing about the cold call and the need to have a good analysis. We want them to be on their toes. Suggest to them that it is not a good idea to divide and conquer on the cases and that they shouldnt put their names on the case if they didnt contribute. Well cold call one individual, and if you d

In b-to-b research, the last 2 are relevant. Only will participate if you provide them with summary and tell the purpose.

This course is about collecting and using data. We want you to be able to sleep well at night. Need to protect rights of respondents. Some obvious ones: Sugging: sales under guise of research. Frugging: fundraising under the guise of researchDo not call lists: wont get called for sales. But dont bar research firms to call you. So sometimes people avoid this by using research to get salesSecond point: most important one maybe, very important.Advocacy research: cooking the books to deceive others to go along with action you want to take. When you did research, there was no chance that any other action would be taken.

Decision research: outcome can influence decision you make.Value of information (alluded to in chapter, in decision models class) if you made a decision without a certain piece of info, you have subjective prob that outcome will be x vs y. You can figure out expected value of best decision without info. If theres additional info you could pay for, how would that change decision? If expected value of decision without info is equal to value of expected value of decision you would make without info, you shouldnt pay for research b/c it doesnt affect decision.

Suppliers can be from within firm or outside. Bring consultants to pitch and see how would you do it? Then they leave and they do it on their own.

Assumptions that models of demand forecasts come from you.

*Contadina: simulated test market very accurate if assumptions are accurate. Estimate what fraction of overall market will trial? What proportion who tries will repeat? Based on this pretty accurate. Part of what goes into it is level of awareness (how much you plan to spend on advertising) and distribution in the marketplace (salesforce youre going to put behind it). If you spend half of that, its lower awareness.

Consider omitting delicare story or cutting part about Clancy guest speaker under provide accurate inputs.

They cant expose your trade secretsAll research has limitations but not all intell firms are good about telling you upfront what you can and cant say based on findings

Want to analyze cases. But first, one more thing to throw in front of you. There are 2 broad frameworks to analyze cases you had.Deontological approach: a moral analysis. Hierarchy of moral principles. You will not violate highest of these no matter what. I never lie to anyone I deal with in business so off the table. Conflicts: different moral principles point to x versus y. What do you do?Consequentialist: what are the consequences of doing x versus y. In terms of who is affected and how are they affected? I might be wiling to harm you if it does the greatest good for the greatest number of people. Look at all parties involved.Read pharmaceutical example, cold call. How would you start thinking about this dilemma? (point out whether its deon or cons). Someone else may have different set of moral standards, will differ.Cold call: think of this from conse. Perspective. Who are parties affected? Implied alternative is that you tell them who you are. (presuming that if you told them your identity theyd be biased and you wouldnt know if you had a problem, distributors would be better off). Other people affected? How are they affected by this decision, whether youre straight with them or tell them the lie. (implicit in that: they find out. But if its super unlikely they find out, you weigh that in too). Take that and decide how to balance against how much it would help end consumers.Each decision has its downsides, hard to decide what to do. Were thinking of A vs. B. Sometiems it helps to think is there an Action C were not considering? What about here? (actually hire a 3rd party to do research).

whos worked in consulting? Of you, how many have had multiple clients in same industry? How did you handle it? Part of the reason you go with them in the first place is b/c they have expertise in this industry. So its natural. So expertise can transfer. But whats not transferred is data about other firms. In some cases, its understood that youll work for competitors and theyre ok. Sometimes firms dont like that so they can put it in contract.You can structure it different ways, so its ethical or unethical. What are prior agreements? Parties must be informed about what deal is. Notice irony? Irony: from same dinner conversation as ED2. you can treat your business partners in transactional way or relational way. If one thinks its relational but other thinks its transactional, that can create problems.In this situation, they did not inform people before so it wasnt that ethical bad for either new or old suppliers.If not in contract its ok.

Q: How to fix it?A: Put it in contract.

People always say you cant teach ethics, b/c people have their own moral principles and you cant assume theyre the same or put your own on others.