Module 8 - Measuring Market Opportunities: Forecasting and Market Research

Question 1

1 Which forecasting tool generally makes the assumption that the future will look very much like the past?
A.Surveys.
B.Observation.
C.Statistical methods.
D.Market tests.

Answer 1

C

Question 2

2 When Kellogg’s plans to introduce a new cereal and uses sales history of an earlier cereal introduction to forecast its sales, Kellogg’s is using what type of forecasting tool?
A.Judgement.
B.Market tests.
C.Analogy.
D.Observation.
E.Surveys

Answer 2

C

Question 3

3 All forecasting tools have what in common?
A.They all can be applied successfully in any business.
B.They are equal in ease of use.
C.They are all likely to produce forecasts that are wrong.
D.They all give common results.
E.They are all equally as good in forecasting future sales

Answer 3

C

Question 4

4 Internal record system, marketing databases, competitive intelligence systems and client contact systems are all examples of:
A.market knowledge systems.
B.marketing tools.
C.forecasting systems.
D.a marketing analysis.
E.tracking systems.

Answer 4

A

Question 5

5 When the customer of a grocery store uses a card that gives the user ‘clip less coupon’ savings when they shop, the grocery store is obtaining information in their:
A.client contact system.
B.internal record system.
C.marketing database.
D.sales report
E.competitive intelligence system.

Answer 5

C

Question 6

6 A client contact management system is most helpful to:
A.a direct mail company.
B.a mass merchandiser.
C.people who perform face-to-face selling for a livelihood.
D.a home-based business.
E.companies that sell their product on the internet

Answer 6

C

Question 7

7 A start-up company wants to determine who their key competitors are. In performing marketing research what might this termed?
A.Research objective.
B.Primary data.
C.Secondary data.
D.Qualitative research.
E.Quantitative research.

Answer 7

A

Question 8

8 In quantitative research the most commonly used technique to gather data is using a(n) ____.
A.survey
B.focus group
C.questionnaire
D.interview
E.experiment

Answer 8

C

Question 9

9 What is the first step in the sampling process?
A.To determine the sample size.
B.To determine the sampling method.
C.To choose the appropriate statistical formula.
D.To determine the acceptable error level.
E.To define the population under study.

Answer 9

E

Question 10

10 The only statistical sampling method which allows the researcher to measure the reliability of the sample data is:
A.non-probability sampling.
B.quota sampling.
C.convenience sampling.
D.probability sampling.
E.judgement sampling.

Answer 10

D

Question 11

1 What is typically estimated in a forecast?
A. Market potential.
B. Penetrated market.
C. Target market.
D. Sales forecast.
E. All of the above.

Answer 11

E

Question 12

2 What is one of the limitations of a survey?
A. They are hard to prepare.
B. What people say is not always what people do.
C. It is hard to find people to answer a survey.
D. It not an acceptable
E. All of the above.

Answer 12

B

Question 13

3 When footwear buyer at Nine West Group uses his intuition in forecasting a trend, he is using what tool?
A. Market tests.
B. Analogy.
C. Observation.
D. SWAG method.
E. Judgement.

Answer 13

E

Question 14

4 When Nestlé makes several adjustments to determine the total number of households who would try their fresh pasta, they are applying:
A. the chain ratio method.
B. indices of buying behaviour.
C. concept purchase intent adjustments.
D. Buying Power Indexes.
E. the SWAG method.

Answer 14

A

Question 15

5 Products for which there is little demand may be introduced because of misguided:
A. market conditions.
B. market knowledge.
C. market niche.
D. market analysis.
E. market potential.

Answer 15

B

Question 16

6 Sales force automation software is an example of a(n):
A. competitive intelligence system
B. client contact system.
C. marketing database.
D. sales report.
E. internal record system.

Answer 16

B

Question 17

7 A systematic and ethical approach for gathering and analysing information about competitors’ activities and related business trends is called:
A. competitor database.
B. competitor management system.
C. competitive intelligence.
D. competitive knowledge system.
E. competitor record system.

Answer 17

C

Question 18

8 A difference between collecting primary data and secondary data is:
A. the availability of the data.
B. the cost of the data.
C. the time commitment to collect the data.
D. quality of data (i.e. people actually do as they say).
E. all of the above.

Answer 18

E

Question 19

9 A focus group typically consists of:
A. a series of individual in-depth interviews with a group of consumers focusing on a particular topic.
B. a group of executives focusing on a particular topic in an open meeting.
C. a group of experts who focus on a particular topic through rounds of ‘blind’ surveys led by an independent facilitator.
D. Six to 12 dissimilar consumers brought together to discuss a variety of different topics.
E. Six to 12 similar consumers brought together to discuss a given topic.

Answer 19

E

Question 20

10 What is the advantage of using a probability rather than a non-probability sample?
A. More people are reached per dollar spent.
B. It provides a basis for estimating the reliability of the results.
C. Choosing a sampling frame is much easier.
D. Telephone surveys are the fastest to administer.
E. There is no advantage if the marketer knows who their customers are.

Answer 20

B

Question 21

Define the term ‘market potential’.

Answer 21

An estimate of market potential often serves as the starting point for preparing a sales forecast

Question 22

How can one measure market potential?

Answer 22

6 Methods:

• Statistical and other qualitative methods
• Observation
• Surveys
• Analogy
• Judgement

Question 23

What are the benefits and drawbacks of using statistical methods for estimating market potential and sales?

Answer 23

• Statistical methods use past history and various statistical techniques to forecast future based on an extrapolation of the past
• Not useful for startups
• Limitations include:
  
  • generally assumes future will look like the past – e.g. technical innovations may make past figures unsound
  • if product or market characteristics change , statistical may not be able to keep up

Question 24

What other evidence-based methods might you use to estimate market potential or forecast sales?

Answer 24

Some forecasts are made based purely on experience but are very difficult to defend judgment calls

Question 25

Explain some of the biases in forecasting.

Answer 25

• Several sources of bias should be recognized
• anchoring bias – where forecasts are ‘anchored’ to recent historical figures, even if market conditions have changes
• capacity constraints are confused with forecasts – producing x cars per hour does not mean you will sell x cars per hour
• incentive pay – bonus plans can encourage managers to exaggerate or underestimate forecasts e.g. setting an artificially low forecasts
• unstated but implicit assumptions e.g. assumptions on awareness and distribution coverage

Question 26

Describe marketing database systems and how they can be used.

Answer 26

• CRM systems
• Different from internal record systems in that it contains information about individual customers preferences rather than info on product types
• online cookies, personalization, vouchers
• various demographic and lifestyle info can be purchased – data comes from warranty cards and the like
• almost all magazine & credit card company will sell its database
• questions to ask before purchasing a database;
• how and where was the data acquired
• compare costs of database containing names about which more is known (opt in lists)
• data mining technology allows a firm to combine databases

Question 27

Define what is meant by the term ‘marketing research’.

Answer 27

• the market research task is the design, collection, analysis and reporting of research intended to gather data pertinent to a particular marketing challenge or situation
• very important to define objectives of research e.g. tracking customer satisfaction, customer responses to ads

Question 28

What is the difference between primary and secondary data sources?

Answer 28

• primary data – collected from individual research subjects using observations, survey, interviews or whatever
• secondary data already exists – someone has already done the primary data collection and placed the data where others can access it, whether free or at a cost

Question 29

In performing marketing research, what are some important ethical considerations to make when dealing with respondents?

Question 30

What are the major differences between probability and nonprobability sampling?

Answer 30

selecting a sample of participants for observational, survey or experimental research required that three questions be answered:

• who is the population from which the sample of respondents will be drawn – typically it’s the target market, defined in demographic or behavioral forms
• what sample size is required to provide an acceptable level of confidence
• by which method (probability sampling - random, non probability sampling – convenience and hence biased) will sample be selected

Question 31

What are some critical questions that managers setting up a client contact management system should ask?

Answer 31

One good starting point for developing CRM capabilities in companies having limited resources is to put in place salesforce automation software. Such software helps companies disseminate real-time product information to salespeople to enable them to be more productive and more able to satisfy customer needs. Such software also allows companies to effectively capture customer intelligence from salespeople, keep track of it for use on later sales calls, and even transfer it to other salespeople in the event of a salesperson leaving the company. Several low-cost software applications that run on PCs are available to keep track of client lists and the various kinds of contacts that are made with each client. ACT and Goldmine are two of the best-known programmes in this arena. These programmes keep track of clients’ names, addresses, phone and fax numbers, and so on – along with all kinds of personal tidbits, such as their spouse’s and children’s names and the kind of wine the client likes to drink – and they also provide an organised way to make notes about each contact with the customer.

Question 32

Name each step of the marketing research process and explain what could go wrong at each step.

Answer 32

Question 33

What are the major sources of error in data collection?

Answer 33

data collection contributes more error than any other part of the process

if the company collects the data themselves, the data could be biased

errors come from

• non-response o selection errors – not part of population
• the way questions are asked
• interviewers interpretation and recording of results
• interviewing cheating
• web one’s are anyomous and open to fraud

Question 34

In a decentralised firm, when each part of the firm prepares its own sales forecast and then those are aggregated to create the forecast for the firm as a whole, what type of forecast approach is used?
A. Top-down.
B. Bottom-up.
C. Assembly.
D. Team.
E. Lateral.

Answer 34

B

Question 35

The research process which recognises and notes people and actions, rather than merely asking for information, is called:
A. tracking studies.
B. observation.
C. consumer surveys.
D. focus groups.
E. mall intercept studies.

Answer 35

B

Question 36

When companies adjust for the buyer’s likelihood to buy in a consumer survey, they are making a(n):
A. awareness adjustment.
B. distribution adjustment.
C. concept purchase intent adjustment.
D. judgement call.
E. BPI adjustment.

Answer 36

C

Question 37

When McDonald’s introduces a new sandwich at some of their locations they are performing a(n)
A. survey.
B. observation.
C. analogy.
D. market test.
E. judgement.

Answer 37

D

Question 38

Of the following forecasting tools, which has the tendency to be very expensive to carry out?
A. Market test.
B. Analogy.
C. Observation.
D. Statistical methods.
E. Survey.

Answer 38

A

Question 39

What does the ratio of the BDI to the CDI tell us?
A. The percentage of buying power for an area in a certain category.
B. How well a brand is doing compared to its category.
C. Ratio of sales in a geographical area compared to nationwide.
D. Ratio of sales of a brand in a geographical area compared to nationwide.
E. None of the above.

Answer 39

B

Question 40

Two important keys to improve the credibility and accuracy of forecasting are:
A. use census data and company historical data when available.
B. make assumptions explicit and use multiple methods.
C. apply indices and adjustments.
D. make test markets big and surveys short.
E. never use the SWAG method and avoid using judgements.

Answer 40

B

Question 41

An understanding of market and competitive conditions and of what buyers in a given market want and need is called:
A. market conditions.
B. market knowledge.
C. market niche.
D. market analysis.
E. market potential.

Answer 41

B

Question 42

The Nine West Retail Stores’ ‘Godzilla Report,’ which provides detailed sales and inventory information about the fastest selling items in Nine West stores from the prior week, is an example of a(n):
A. internal record system.
B. marketing database.
C. competitive intelligence system.
D. client contact system.
E. sales report.

Answer 42

A

Question 43

The question, ‘In what sequence and at what level of aggregation should data be reported?’ is important to ask when designing a(n):
A. competitive intelligence system.
B. client contact system.
C. marketing database.
D. sales report.
E. internal record system.

Answer 43

E

Question 44

A telemarketer decides to have one particular salesperson sell only one product in his product line-up. This decision was based on information from the:
A. client contact system.
B. marketing database.
C. internal record system.
D. sales report.
E. competitive intelligence system.

Answer 44

C

Question 45

An important issue to be considered when designing marketing databases is:
A. the cost of collecting the data.
B. the economic benefits of using the data.
C. the ability of the company to keep the data current in today’s mobile society.
D. the rapid advances in technology that permit the data to be used to maximum advantage.
E. all of the above.

Answer 45

E

Question 46

The companies Polk, Donnelley and Claritas have what in common?
A. They develop marketing database systems for other companies.
B. They sell marketing data from their commercial marketing databases.
C. They analyse what marketing data are most useful for a company to buy or collect.
D. Companies outsource their marketing department to Polk, Donnelley and Claritas.
E. None of the above

Answer 46

B

Question 47

The information in a compiled database might be collected from a(n):
A. telephone directory.
B. magazine publisher.
C. credit card issuer.
D. affinity group.
E. all of the above.

Answer 47

A

Question 48

The following is a good source to get information on competitors:
A. annual reports.
B. government documents.
C. online databases.
D. trade organisations.
E. all of the above.

Answer 48

E

Question 49

Marketing research is performed to:
A. determine a target market.
B. develop the best product.
C. increase sales.
D. address a particular marketing challenge or situation.
E. all of the above.

Answer 49

D

Question 50

What is the first step in the marketing research process?
A. Determine data sources.
B. Collect data.
C. Analyse data.
D. Identify managerial problems and establish research objectives.
E. Design research.

Answer 50

D

Question 51

A drawback of qualitative research is that:
A. it’s typically not accurate.
B. the information is of little benefit.
C. the conclusions drawn are usually shallow.
D. generally the small samples may not fairly represent the larger population.
E. the data is best used for statistical purposes.

Answer 51

D

Question 52

Greater confidence can be placed in quantitative studies because of:
A. their larger sample size.
B. their data collection process.
C. the type of the people sampled.
D. the statistical methods applied.
E. all of the above.

Answer 52

A

Question 53

When a food manufacturer pulls ten consumers from a target market together to taste and discuss a cookie that will soon go on the market, they are performing a(n):
A. survey.
B. focus group.
C. questionnaire.
D. interview.
E. experiment.

Answer 53

B

Question 54

What kind of scale is being used when a question asks the respondent to answer by stating the degree to which they are satisfied or not satisfied?
A. Semantic Differential Scale.
B. Likert Scale.
C. Quality Rating Scale.
D. Importance Scale.
E. Intention-to-Buy Scale.

Answer 54

A

Question 55

What kind of scale is being used when a question asks the respondent to answer by showing their level of agreement or disagreement?
A. Semantic Differential Scale.
B. Likert Scale.
C. Quality Rating Scale.
D. Importance Scale.
E. Intention-to-Buy Scale.

Answer 55

B

Question 56

The three most popular means of collecting primary data are: A. focus groups, surveys and mall intercept studies.
B. focus groups, observation and interviews.
C. observation, surveys and experiments.
D. experiments, focus groups and observation.
E. interviews, experiments and surveys.

Answer 56

C

Question 57

A common use of experiments is to:
A. examine the consumer’s likelihood to buy a new product at different price points.
B. test a consumer’s preference in product packaging.
C. determine the target market for a product.
D. test a consumer’s satisfaction in a product.
E. determine the best means of advertising.

Answer 57

A

Question 58

Of the different methods of contacting potential research participants, which has the highest response rate?
A. Telephone.
B. Mail.
C. Email.
D. Internet.
E. Face-to-face.

Answer 58

E

Question 59

Of the different methods of contacting potential research participants, which is typically the most expensive?
A. Telephone.
B. Mail.
C. Email.
D. Internet.
E. Face-to-face

Answer 59

E

Question 60

A bank is trying to determine whether or not to install ATM machines at a grocery store chain. They determine this by observing the usage of an ATM at a convenience store. The bank is using:
A. probability sampling.
B. nonprobability sampling.
C. random sampling.
D. inconvenient sampling. E. margin of error sampling.

Answer 60

B

Question 61

When a person collecting data for marketing research influences the respondent, perhaps inadvertently, to tell the researcher what she wants to hear, there will be:
A. skewed results.
B. margin of error.
C. collector bias.
D. nonprobability sampling.
E. prejudiced results.

Answer 61

C

Question 62

For what type of research technique is it common to have the following errors: non- response by some respondents; selection errors by the interviewer; improper questioning by the interviewer; improper interpretation and recording of answer; and interviewer cheating?
A. Telephone survey.
B. Focus groups.
C. Experiments.
D. Mail survey.
E. None of the above.

Answer 62

A

Question 63

The following occurs during data analysis:
A. Check that instructions were followed.
B. Check that data is complete.
C. Check that data is consistent.
D. Compute data to determine percentages and averages.
E. All of the above.

Answer 63

E

Question 64

What is the final step in marketing research?
A. Analyse the data.
B. Implement results.
C. Report results.
D. Review entire process.
E. None of the above.

Answer 64

C

Question 65

What type of research is best for understanding the insights into consumer behaviour?
A. Probability.
B. Nonprobability.
C. Face-to-face.
D. Qualitative.
E. Quantitative

Answer 65

D

Question 66

What type of research is best for measuring a population’s attitudes and likely responses to products or marketing programmes?
A. Probability.
B. Nonprobability.
C. Face-to-face.
D. Qualitative.
E. Quantitative.

Answer 66

E

Question 67

A large international rental-car company decides to develop a retention programme that would provide incentives for its heavy users to continue their loyalty to the company. You, as a consultant, are asked to design a retention programme that will accomplish this purpose.

Answer 67

The objective of a retention programme for a car rental company should be to offer a direct incentive to customers for heavy usage which will encourage repeat busi- ness. Probably the most successful type of programme would be similar to the airlines’ frequent flyer programmes – indeed, one can use them by transferring car rental revenues into mileage awards with a given airline. In a similar fashion, the car rental firm could set up its own programme and award points which could be transferred into monetary credits to be used to rent the company’s cars. The company could also identify its heavy users by geographical location or season of the year, and then use direct mail to offer discount or trade-up coupons which are good for use during a restricted time period on certain types of company cars. The value of the discounted coupon would depend on the extent of usage.

Question 68

Before putting your recommended retention programme in operation, the company asks you to design a marketing research study that will test the effectiveness of your programme.

Answer 68

The programme could be tested by selecting a sample of company users for the prior year and making them a special offer via a discount coupon good for a limited time period. To validate the coupon, the recipients would have to join the compa- ny’s frequent mileage club, whereby they could receive credit for the points earned by using the car rental company’s cars. The effectiveness of the intended pro- gramme would be determined largely by the difference between the usage generated by members of the sample for the previous 12 months and the following 12 months. Also, a tabulation should be make of new customers (those who had not patronised the company during the prior 12 months).

Question 69

A local theatre company wants to know whether current season ticket holders would prefer more comedies or more serious dramas next season. Because programme decisions must be made soon, the information must be collected quickly. But the research budget is limited. Which survey questioning method (i.e., mail, phone, personal interviews) would you recommend using to collect the information? What limitations might that method impose on the study?

Answer 69

This problem lends itself to a telephone survey, because this method is quick and low cost. Further, unlike personal interviews in the mall, the method can be based on a probability sample – so the results can be examined for statistical reliability. The primary limitation (compared to other methods) is that visual materials cannot be readily displayed in a telephone survey (this could only be done with technology in place by mailing out visual materials and calling in conjunction with them). Also, some interpersonal feedback that depends on body language is lost in this approach. Another problem is that refusal rates are high and increasing due to an overload on consumers from a variety of companies.

Question 70

The household detergents division of a large household products company with worldwide distribution is planning a research study among women 21 years and over to determine their attitudes toward home laundering and the products and brands used in such activities. Studies are to be carried out in a variety of countries in the Far East, Middle East, Africa, Western Europe, Eastern Europe, and South America. What data collection problems would you expect to experience in doing this research across a variety of countries?

Answer 70

The problems which will be encountered in doing such research across a variety of countries include the difficulties associated with sample design (inadequate popula- tion data), questionnaire design, hiring/training/control over interviewers, data- collection methods (phone versus personal interviewing) and actual data collecting (asking questions and recording answers). It will be difficult to compare the results across countries given the variation in the sample designs, the response rates of different groups, the calibre of the interviewers and the meaning of key words in the questionnaire.

Question 71

What are the dangers involved in using sales force estimates to forecast a product’s future sales? Under which conditions are such estimates most likely to be accurate and useful?

Answer 71

The salesforce estimate may have an upward or downward bias. A downward bias is particularly likely if the sales forecast is tied to quota goals. Further, salespeople are unlikely to know about other marketing efforts (such as planned advertising campaigns) that would affect future sales. However, salesforce estimates are particularly useful for short-term forecasts during especially volatile market.

Question 72

A company making high-speed modems – devices that convert signals from one type of machine (computer) to a form compatible with another (telephone) – was concerned that its latest modem, which had just been introduced to the market in the previous month, would soon be upstaged by a yet faster device produced by a major competitor. Your marketing research company has been hired to provide data about this competitor regarding its objectives (short-term/long-term), its R&D capabilities and the likelihood of its introducing a higher-speed modem than your client’s in the immediate future. Your research firm has been asked to present a plan for obtaining such data.

Outline the major parts of your proposed plan including the data you want and how you will obtain it.

Answer 72

The major parts of the proposed plan, the data wanted and the method of obtaining that data are as follows:

Competitor’s characteristics

• Data include revenues, share growth (trends), profitability, financial resources, new-product trends, strength of R&D resources and relations to parent company (if necessary).
• Sources include industry publications, industry experts, competitor’s past behaviour, own salesforce, former executives of competitor and analysis of educational qualification and job experience of key R&D personnel.

Company objectives

• Market share and revenues, product technology, history of technology successes and failures, prior response to being relegated to lower position on technology rating and weight put behind typical product launch.
• Sources include most of those listed under competitor’s characteristics plus benchmarking present product(s) to determine the feasibility of modifying them to obtain product superiority.

Competitor’s strengths and weaknesses

• Can be largely deduced from information cited under first two headings.
• Many of same sources already cited plus interviews from company’s major accounts.

Question 73

You are the marketing vice-president of the Tennant Company, a major manufacturer of industrial cleaning equipment and supplies. The firm’s engineers have designed a new sweeper that promises to be more effective at cleaning up oil and metal shavings than any other product currently on the market. The product might appeal to manufacturers in a variety of industries involving the cutting and shaping of metal. How would you find out whether potential customers are interested in such a product and what its potential sales volume is likely to be?

Answer 73

In developing products for industrial customers, it is usually desirable to bring them into the developmental process in order to elicit their ideas and suggestions in making the product better. In this case Tennant should seek current customers across industries to ask what they think of such a product and if they would purchase the product if it could accomplish the stated product claims. A critical element of this process would be to determine what the customer would be willing to pay for the product. In addition, the company might want to provide some customers with demonstrator models to test the product in actual conditions and to generate interest in it. Since Tennant is already a major player in the industrial cleaner market it is well aware of the market for such a product. Moreover, it would be familiar with competitors. Consequently, it would not be difficult to conduct sales potential analyses based on industry sales information available to the company.

Question 74

Some companies are using the Internet to sell their products – both new and old. How could the Internet be used to develop a demand curve for a new product? An established product?

Answer 74

For a new product the company could use the Internet to auction it off. To do so would require a description of the product, its uses, the benefits it provides, the amount involved, and competitive/substitute products and their prices. Bidders would receive some kind of incentive to enter a bid. The range of bid prices coupled with their frequency could be used as an estimate of the perceived value of the new product.

For an established product consumers could be asked to estimate the percent increase or decrease in sales resulting from each increment ‘up’ and ‘down.’ The assumption here is that in responding the consumer is actually revealing his/her demand schedule. Again, there would have to be a ‘reward’ for responding. The difficulty would be that the company would not know whether those answering were representative of the firm’s customers.

Question 75

Information about the success rate (percentage of deaths) of various hospitals in a given geographical area for certain kinds of treatment (e.g., heart bypass surgery) is becoming available. What precautions would you suggest a prospective hospital patient take in making a decision based on such statistical information?

Answer 75

The main precaution a prospective hospital patient should take is to try to segment the population which experienced a certain kind of treatment in each hospital. The segments should be based on risk which obviously would be difficult to obtain. It may be possible to get some indication of the age of the various patients which for certain treatments may be an important indicator of success. Hospitals that treat a large number of emergency cases may have lower success rates for certain kinds of treatment. One way of going around the hospital and the needed information is to do the kind of analysis suggested above with doctors who specialise in the kind of treatment you are interested in. More word-of-mouth information should be available and from a variety of sources including former patients and doctors from related fields – or your general practitioner or internist.