Chapter Two

Defining the Marketing

Research Problem and
Developing an Approach
 2-2

Chain Restaurant Study

One day I received a
phone call from a
research analyst who
introduced himself as
one of our alumni.
He was working for a
restaurant chain in
town and wanted help
analyzing the data he
had collected while
conducting a
marketing research
study.
 2-3

Chain Restaurant Study

When we met, he presented me with a copy

of the questionnaire and asked how he
should analyze the data. My first question
to him was,
 2-4

Chain Restaurant Study

When he looked
perplexed, I
explained that
data analysis is
not an
independent
exercise.

Rather, the goal of data analysis is to

PROVIDE INFORMATION RELATED TO THE
PROBLEM COMPONENTS.
 2-5

Chain Restaurant Study

I was surprised to learn that he
did not have a clear
understanding of the
marketing research problem
and that a written definition
did not exist. So before going
any further, I had to define the
marketing research problem.
Once that was done, I found that
much of the data collected was
not relevant to the problem. In
this sense, the whole study was a
waste of resources. A new study
had to be designed and
implemented to address the
problem defined.
Source: Naresh Malhotra, MR
 2-6

MR helps to fill Information Gaps

LISTEN To Your Customer

- Ford sends one representative
every four months (avg.)

- Toyota sends one representative per month

(avg.)
 Iceberg Effect
Identify Symptoms vs. Causes

10%
is visible

90% Competitio
n
is Marketing
invisible
Complex Interactions Mix
Technolog
Consumer
y
Behavior
 Problem Definition

 Analyze the situation (use exploratory

research methods) – evaluate secondary
data, focus group, pilot study etc
 State clear research objectives
-
 Research Maxim: “if you do not know what
you are looking for, you will not find it”
 Degree of Problem Definition
& Research Design

Uncertain Aware Certain

(Vague problem)

Exploratory Descriptive Causal

Research Research Research

Three major types of research studies

Research Design is a master plan for research studies

…who, what, where, when, how?
 2-10
IMPORTANCE OF DEFINING THE
PROBLEM

 Problem definition is the most important

step
 Problem definition involves stating the
general problem and identifying the
specific components of the marketing
research problem.
 All the effort, time, and money spent will
be wasted if the problem is
misunderstood or ill defined.
 2-11

The Problem Definition Process

Tasks Involved

Discussion Interviews Secondary Qualitative

with with Data Research
Decision Maker(s) Experts Analysis

Environmental Context of the Problem

Step I: Problem Definition

Management Decision Problem

Marketing Research Problem

Step II: Approach to the Problem

Analytical Specification
Objective/ Model: Verbal, Research of
Theoretical Hypotheses
Graphical, Questions Information
Foundations
Mathematical Needed

Step III: Research Design

 2-12

THE PROCESS OF DEFINING THE

PROBLEM

The tasks involved in problem definition:

 Discussions with Decision Makers
 Interviews with Industry Experts
 Secondary Data Analysis
 Qualitative Research
 help to understand the background of the

problem by analyzing the environmental context.

 This facilitates the identification of the

management decision problem.

 Then the management decision problem is

translated into a marketing research problem.

 2-13

TASKS INVOLVED

 Discussions with decision makers:

 The problem audit provides a useful
framework for interacting with the DM and
identifying the underlying causes of the
problem.
 It is a comprehensive examination of a
marketing problem with the purpose of
understanding its origin and nature.
 The problem audit involves discussions with
the DM on the following issues that are
illustrated with a problem facing McDonald's:
 2-14

The Problem Audit

The problem audit is a comprehensive examination of a marketing
problem with the purpose of understanding its origin and nature.
1. The events that led to the decision that action is needed, or the
history of the problem.
2. The alternative courses of action available to the DM.
3. The criteria that will be used to evaluate the alternative courses
of action.
4. The potential actions that are likely to be suggested based on
the research findings.
5. The information that is needed to answer the DM's questions.
6. The manner in which the DM will use each item of
information in making the decision.
7. The corporate culture as it relates to decision making.
 THE PROCESS OF DEFINING THE 2-15

PROBLEM
• Problem audit needed because the DM, in
most cases has only a vague idea of what
the problem is.
• e.g. the DM may know that the firm is losing
market share but may not know why, because
DMs tend to focus on symptoms rather
than on causes.
• Inability to meet sales forecasts, loss of market
share, and decline in profits are all symptoms.
• The researcher should treat the underlying
causes, not merely address the symptoms.
• e.g. loss of market share may be caused by a
superior promotion by the competition,
inadequate distribution of the company's
products, or any number of other factors.
• Only when the underlying causes are identified
can the problem be successfully tackled
 2-16

Your Task….

• Obtain as much information as possible about a

troubled brand by visiting its website. Write a brief
report.
• As the brand manager for that brand you are
concerned about improving the performance of the
brand.
• Identify possible symptoms that indicate to
you that the performance is below
expectations.
• You are conducting marketing research to help
improve the performance of the brand.
• Identify possible underlying causes that might
be contributing to the lack of performance.
 THE PROCESS OF DEFINING THE 2-17

PROBLEM
 In order to be fruitful, the interaction between the DM
researcher should be characterized by the seven Cs:
 Communication. Free exchange of ideas between the DM and
researcher
 Cooperation. Marketing research is a team project in which both
parties (DM & researcher) must cooperate.
 Confidence The interaction between the DM and the researcher
should be of mutual trust.
 Candor. There should not be any hidden agendas, and an attitude
of openness should prevail.
 Closeness. Feelings of warmth and closeness should characterize
the relation between the DM and the researcher.
 Continuity. The DM and the researcher must interact continually
rather than sporadically
 Creativity. The interaction between the DM and the researcher
should be creative rather than formality
 2-18

Interviews with Industry Experts

• These experts may be found both inside and
outside the firm.
• Information is obtained by unstructured personal
interviews, without administering formal
questionnaire.
• It is helpful to prepare a list of topics to be
covered
• The order in which these topics are covered and the
questions to ask should not be predetermined
• This allows greater flexibility in capturing the
insights of the experts.
• The purpose of interviewing experts is to help
define the marketing research problem rather
than to develop a conclusive solution.
 2-19

Secondary Data Analysis

• Secondary data are data collected for some

purpose other than the problem at hand
• Primary data, on the other hand, are originated
by the researcher for the specific purpose of
addressing the research problem.
• Secondary data include information available by
business and government sources, commercial
marketing research and computerized databases.
• Analysis of available secondary data is an essential
step problem definition process
• Primary data should not be collected until the
available secondary data have been fully analyzed.
 2-20

Qualitative Research
• Qualitative research is unstructured,
exploratory in nature, based on small samples
• Popular qualitative techniques such as focus
groups (group interviews), word association
(asking respondents to indicate their first responses
to stimulus words), and depth interviews (one-an-
one interviews that probe the respondents' thoughts
in detail), exploratory research techniques, such
as pilot surveys and case studies, may all be
undertaken to gain insights into the phenomenon of
interest.
• Pilot surveys tend to be less structured than
large-scale surveys in that they generally contain
open-ended questions and sample size is smaller.
• Case studies involve an intensive examination of a
few selected cases of the phenomenon of interest
 2-21

Role of qualitative research in

defining the marketing research
problem
REAL RESEARCH: P&G's Peep into
Privacy
 ENVIRONMENTAL CONTEXT OF THE 2-22

PROBLEM


The insights gained from qualitative research, along with
discussions with decision makers, interviews with
industry experts, and secondary data analysis help the
researcher to understand the environmental context of
the problem.

Other Factors to be considered for understanding
the environment of the firm:

past information and forecasts pertaining to the industry
and the firm

resources and constraints of the firm

objectives of the decision maker

buyer behavior

legal environment, economic environment, and
marketing and technological skills of the firm
 2-23
Factors to be Considered in the
Environmental Context of the Problem

PAST INFORMATION AND

FORECASTS

RESOURCES AND CONSTRAINTS

OBJECTIVES

BUYER BEHAVIOR

LEGAL ENVIROMENT

ECONOMIC ENVIROMENT

MARKETING AND TECHNOLOGICAL

SKILLS
 Past Information and 2-24

Forecasts

 Past information and forecasts of trends

with respect to sales, market share,
profitability, demographics, and
lifestyle can help understand the
underlying marketing research problem.
 e.g. if a firm's sales have decreased but
industry sales have increased, the
problems will be very different than if the
industry sales have also decreased. In the
former case, the problems are likely to be
specific to the firm.
 2-25

Objectives

 Decisions are made to accomplish

objectives. The formulation of the
management decision problem must be
based on a clear understanding of two
types of objectives: (I) the organizational
objectives and
 (2) the personal objectives of the
decision maker (DM).
 2-26

Buyer Behavior

• Buyer behavior is a central component

of the environmental context.
• In most marketing decisions, the
problem can ultimately be traced to
predicting the response of buyers to
specific actions by the marketer.
• The buyer behavior factors that
should be considered include:
 2-27

Buyer Behavior

• The number and geographical location

of the buyers and non-buyers
• Demographic and psychological
characteristics
• Product consumption habits and the
consumption of related product
categories
• Media consumption behavior and
response to promotions
• Price sensitivity
• Retail outlets patronized
• Buyer preferences
 2-28

REAL RESEARCH
How "Got Milk?" Got Sales
Legal Environment & Economic 2-29

Environment

 The legal environment includes public policies,

laws, government agencies, and pressure groups
 Economic environment: purchasing power, gross
income, disposable income, discretionary
income, prices, savings, credit availability, and
general economic conditions
 After gaining an understanding of the
environmental context of the problem,
researcher can define the management decision
problem and the marketing research problem.
 2-30
MANAGEMENT DECISION PROBLEM AND MARKETING
RESEARCH PROBLEM

 The management decision problem :

Should Harley Davidson invest to produce
more motorcycles?
 The marketing research problem:

Determine if the customers would be loyal

buyers of Harley Davidson in the long
term.
 The management decision problem asks
what the DM needs to do, whereas,
marketing research problem asks what
information is needed and how it can be
obtained
 MANAGEMENT DECISION 2-31

PROBLEM AND MARKETING

RESEARCH PROBLEM
 Research can provide the necessary
information to make a decision.
 The management decision problem is
action oriented. It is concerned with the
possible actions the DM can take.
 The marketing research problem is
information oriented. It involves
determining what information is needed, how
that information can be obtained effectively
and efficiently.
 Management decision problem focuses
on symptoms, the marketing research
problem focuses on underlying causes.
 2-32

Example: Defining the Problem

 After discussion, analysis of secondary data,

and qualitative research, the problem was
identified as follows:
 Management Decision Problem:
 What should be done to improve the
patronage of Sears( A Retail store)?
 Marketing Research Problem:
 Determine the relative strengths &
weaknesses of Sears viz-a viz other major
competitors with respect to factors that
influence store patronage
 2-33
MANAGEMENT DECISION PROBLEM AND
MARKETING RESEARCH PROBLEM
 MARKETING
RESEARCH
 MANAGEMENT PROBLEM
DECISION  Asks what
PROBLEM information is
 Asks what the needed and how
decision maker it should be
needs to do obtained
 Action oriented  Information
 Focuses on oriented
symptoms  Focuses on the
underlying causes
 2-34

DEFINING THE MARKETING RESEARCH PROBLEM

• The general rule to be followed in

defining the marketing research
problem is that the definition should
• (l) allow the researcher to obtain all
the information needed to address
the management decision problem,
and
• (2) guide the researcher in
proceeding with the project.
DEFINING THE MARKETING 2-35

RESEARCH PROBLEM
 Researchers make two common errors
in problem definition.
 The first arises when the research
problem is defined too broadly. A
broad definition does not provide clear
guidelines for the subsequent steps.
 Some examples of overly broad
marketing research problem definitions
are: (1) improve the competitive
position of the firm, or (2) improve the
company's image. These are not specific
enough to suggest a research design.
 2-36

DEFINING THE MARKETING RESEARCH

PROBLEM
 The second type of error is the opposite: The
marketing research problem is defined too
narrowly.
 A narrow focus may preclude consideration of some
courses of action or prevent the researcher from
addressing important components of the management
decision problem.
 For example, in a project conducted for a major
consumer products firm, the management problem was
how to respond to a price cut initiated by a competitor.
 DEFINING THE MARKETING 2-37

RESEARCH PROBLEM
 The alternative courses of action initially
identified by the firm's research staff were: (1)
decrease the price of the firm's brand to match the
competitor's price cut; (2) maintain price but
increase advertising heavily; (3) decrease the price
somewhat, without matching the competitor's
price, and moderately increase advertising. None of
these alternatives seemed promising.
 When outside marketing research experts were
brought in, the problem was redefined as improving
the market share and profitability of the product
line.
 2-38
Management Decision Problem Vs.
Marketing Research Problem

Management Decision Problem Marketing Research Problem

Should a new product be To determine consumer preferences

introduced? and purchase intentions for the
proposed new product.

Should the advertising To determine the effectiveness

campaign be changed? of the current advertising
campaign.

Should the price of the To determine the price elasticity

brand be increased? of demand and the impact on sales
and profits of various levels
of price changes.
Proper Definition of the Research 2-39

Problem

Marketing Research Problem

Broad Statement

Specific
Components
 2-40

Your Task….

 Coca-Cola co. changed its flagship brand of

approx.100 yrs to New Coke & subsequently
returned to the old favorite, Coca Cola Classic.
 Working in a group, read as much material as you
can on this marketing bungle
 Identify the decision problem the Coke
management faced
 As a team of researcher define the marketing
research problem & its specific components
 2-41

Your Task….
• Marketing Research Begins at Home
(or Near the Campus)
• Visit a local business located near your
campus. Interview the business owner or
manager/decision maker and identify some of
the marketing challenges facing this
business. Also, interview an expert in this
industry. Search and analyze secondary data
pertaining to this business and the industry.
• 1. Define the management decision problem.
• 2. Define the marketing research problem.
 2-42

DO IT YOURSELF
 State the research problems for each of the
management decision problems.
 Should a new product be introduced?

 Should an advertising campaign run for three

years be changed?
 Should the in-store promotion for the existing

product line be increased?

 What pricing strategy should be adopted for a

new product?
 Should the compensation package be changed to

motivate the sales force better?