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module 4

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Department
Marketing
Course Code
MKT 100
Professor
Paul Finlayson

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Module 4
Understanding Buyer Behaviour
1. Researching Customers
In microeconomics there is a concept called private information which states that a firm profits from unique
information and insights it has about production techniques and trade secrets. An important trade secret is the unique
insight a business has about the behaviour of customers that is not common knowledge, particularly knowledge
about changing consumer preferences and buying behaviour. This is even more important when innovations such as
the Internet are dramatically changing customer search and shopping behaviour. Private information and insightful
interpretation of such information about customer behaviour can be a powerful driver of competitive success and
profitability. This module introduces you to the major tools used to study customers, particularly for new product
development. It then provides you with some general insights into customer buying behaviour and the cultural and
social influences on such behaviour.
When done simply and sensibly, consumer research can provide insights worth millions of dollars. It is an important
marketing capability that all business students should know something about. The first and most important consumer
research activity of a current business is to track customer satisfaction and dissatisfaction. Firms keep track of
customer dissatisfaction by tracking returns and customer complaints. This should be a given, and in some markets
(such as prescription drugs), is sometimes required by law. Many firms also survey their own customers or have
someone else survey customers to measure customer satisfaction. This identifies what it is about the firm’s product
or service that most delights the consumer and what it is about the product or service that they dislike. Tracking
customer satisfaction/dissatisfaction and trends in demand is what a lot of modern market research is about.
Firms also undertake special consumer research studies to test product concepts in new product development,
particularly in global markets where the company has never operated and products need to be redesigned. Such
special consumer research studies are a major way that the new players in the global marketplace learn about
consumers. They employ local market research firms to study local consumers. Such learning about demand by
suppliers is a good thing for market efficiency.
This module, rather than providing a general survey of all listening to the consumer research techniques,
concentrates on a few basic techniques, such as in-depth study of individual consumers, focus group methodology
and survey research, mainly employed in product development or commercializing innovation. Many different
research methods can be used and their effectiveness will be discussed. But whatever the specific research methods,
the market research process typically includes the following logical steps:
1.Problem Definition/Question to be Answered (the most difficult step)
2.Research Design
3.Data Collection
4.Data Analysis and Interpretation
5.Presentation of Results
Often, an informal study is carried out to identify the real problem and frame the questions to be addressed (and this
can take a lot of discussion and politics). Market researchers and product developers then develop a research plan
and design to address the questions. This is likely to involve one of the following three types of research and data.
Types of research
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Exploratory research and data collection are undertaken when the problem or research question is still fuzzy and
management wants additional information before undertaking further research. It is likely to include the study of
internal records, customer complaints, financial analysis trends, and discussions with distributors and suppliers. It is
likely to involve the consulting of experts and environment analysis described in the Market Orientation module.
This is the sensible way of boiling the problem down to its essence; what is the real question that needs to be
answered, the real problem that needs to be studied? Most importantly, is it fundamentally a problem with product or
service design? If it is, it needs to be addressed immediately because it may take months or years of new product
development to fix.
Descriptive survey research is typically used to describe customers, either small numbers of customers in-depth, or
large numbers of customers by survey research. It typically gathers descriptive profiles of customers and is used to
measure customer satisfaction, study product use and segment customers. It answers the who, what, here, when, and
why of consumer behaviour. It can be cross-sectional or longitudinal. Cross-sectional research studies a “cross-
sectional sample of customers responses at a specific point in time. For example, if business students were asked
How satisfied are you with the college of business?” the responses would reflect a cross-section of student
satisfaction. In contrast, longitudinal research involves the repeated measurement of the same customer and
addresses customer responses over a period of time. Longitudinal research is almost always undertaken in modern
company customer database mining so as to measure changing customer purchase behaviour, channel use,
satisfaction and, of course, profitability.
Cause-and-effect research is used to explore the question “Does X cause Y?” such as the effects of a price decrease
on sales and the effect of TV advertising campaign spending on sales. This sort of applied research is done on the
metrics dashboards of managers.
2. Qualitative Consumer Research
Qualitative research includes methods such as observation and in-depth interviews with customers, suppliers and
middlemen. Many anthropology majors trained in appropriate observation and interview methods are now employed
in market research and design firms. They study ethnography, the way of life of people. The details on using
observational research to understand how the customer uses the product or service are described and examples are
presented in the next Segmentation and Positioning module.
Talking directly to customers and observing their use of the product or service seems so obvious, yet some firms do
not do enough of it. Instead, they may rely on survey research where too many steps and interpretative judgments
separate customers and decision makers. The vivid impact on managers and engineers who listen to customers own
words and see how they use a product in their homes, in their office or on their production lines is lost if customers
are not observed using the product. As a consequence, the voice of the customer is not heard clearly enough
throughout the organization and has less impact on informal and formal decision-making. In short, the organization
is less market oriented.
Plastering photos taken during the customer visit around the room keep this voice heard in decision-making. The
heading of a cover story in Marketing News, February 2006, was The implications of a photograph of a home are
countless. For a marketer; an image is worth several hours spent in focus groups or interviews. In the 1990s,
Whirlpool took photos of several hundred refrigerator interiors across several hundred randomly sampled
households. They found that the modern refrigerator was used much more as a beverage cooler than they had
thought and much less for storing meat and vegetables. Their interior design of their refrigerators did not meet the
needs of their customers. The new refrigerators have much more beverage space and have been very well-received
by consumers.
The Swedish furniture retailer IKEA employed anthropologists in Japan to study 100 families over several months.
This is after their first attempt to enter the Japanese market failed. It led to a redesign of the furniture sold and a
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Description
Module 4 Understanding Buyer Behaviour 1. Researching Customers In microeconomics there is a concept called private information which states that a firm profits from unique information and insights it has about production techniques and trade secrets. An important trade secret is the unique insight a business has about the behaviour of customers that is not common knowledge, particularly knowledge about changing consumer preferences and buying behaviour. This is even more important when innovations such as the Internet are dramatically changing customer search and shopping behaviour. Private information and insightful interpretation of such information about customer behaviour can be a powerful driver of competitive success and profitability. This module introduces you to the major tools used to study customers, particularly for new product development. It then provides you with some general insights into customer buying behaviour and the cultural and social influences on such behaviour. When done simply and sensibly, consumer research can provide insights worth millions of dollars. It is an important marketing capability that all business students should know something about. The first and most important consumer research activity of a current business is to track customer satisfaction and dissatisfaction. Firms keep track of customer dissatisfaction by tracking returns and customer complaints. This should be a given, and in some markets (such as prescription drugs), is sometimes required by law. Many firms also survey their own customers or have someone else survey customers to measure customer satisfaction. This identifies what it is about the firms product or service that most delights the consumer and what it is about the product or service that they dislike. Tracking customer satisfaction/dissatisfaction and trends in demand is what a lot of modern market research is about. Firms also undertake special consumer research studies to test product concepts in new product development, particularly in global markets where the company has never operated and products need to be redesigned. Such special consumer research studies are a major way that the new players in the global marketplace learn about consumers. They employ local market research firms to study local consumers. Such learning about demand by suppliers is a good thing for market efficiency. This module, rather than providing a general survey of all listening to the consumer research techniques, concentrates on a few basic techniques, such as in-depth study of individual consumers, focus group methodology and survey research, mainly employed in product development or commercializing innovation. Many different research methods can be used and their effectiveness will be discussed. But whatever the specific research methods, the market research process typically includes the following logical steps: 1. Problem Definition/Question to be Answered (the most difficult step) 2. Research Design 3. Data Collection 4. Data Analysis and Interpretation 5. Presentation of Results Often, an informal study is carried out to identify the real problem and frame the questions to be addressed (and this can take a lot of discussion and politics). Market researchers and product developers then develop a research plan and design to address the questions. This is likely to involve one of the following three types of research and data. Types of research www.notesolution.comExploratory research and data collection are undertaken when the problem or research question is still fuzzy and management wants additional information before undertaking further research. It is likely to include the study of internal records, customer complaints, financial analysis trends, and discussions with distributors and suppliers. It is likely to involve the consulting of experts and environment analysis described in the Market Orientation module. This is the sensible way of boiling the problem down to its essence; what is the real question that needs to be answered, the real problem that needs to be studied? Most importantly, is it fundamentally a problem with product or service design? If it is, it needs to be addressed immediately because it may take months or years of new product development to fix. Descriptive survey research is typically used to describe customers, either small numbers of customers in-depth, or large numbers of customers by survey research. It typically gathers descriptive profiles of customers and is used to measure customer satisfaction, study product use and segment customers. It answers the who, what, here, when, and why of consumer behaviour. It can be cross-sectional or longitudinal. Cross-sectional research studies a cross- sectional sample of customers responses at a specific point in time. For example, if business students were asked How satisfied are you with the college of business? the responses would reflect a cross-section of student satisfaction. In contrast, longitudinal research involves the repeated measurement of the same customer and addresses customer responses over a period of time. Longitudinal research is almost always undertaken in modern company customer database mining so as to measure changing customer purchase behaviour, channel use, satisfaction and, of course, profitability. Cause-and-effect research is used to explore the question Does X cause Y? such as the effects of a price decrease on sales and the effect of TV advertising campaign spending on sales. This sort of applied research is done on the metrics dashboards of managers. 2. Qualitative Consumer Research Qualitative research includes methods such as observation and in
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