Value of Marketing Research: Example given in previous lecture

Transcription

1 Value of Marketing Research: Example given in previous lecture Decision: To launch a new product or keep selling the current product. Payoffs: Current product: $5 million New product: $ 1 million (if failure), $ 6 million (if success) Manager s belief about success: 50% Now assume that a marketing research project can be done to accurately predict the success or failure of the new product. What s the value of the research? Dr. Yacheng Sun, UC Boulder 1

2 Assess the Value of Marketing Research Information Step 1. What will be the decision without marketing research? Step 2. What are the odds that marketing research will change the decision made in Step 1? Step 3. When the change occurs, how much will be the gain? Step 4. Value of MR= Odds of changing decision in Step 2 the gain in Step 3 Dr. Yacheng Sun, UC Boulder 2

3 What happens if the prospect just gets rosier? Decision: To launch a new product or keep selling the current product. Payoffs: Current product: $5 million New product: $ 1 million (if failure), $ 6 million (if success) Manager s belief about success: 90% Dr. Yacheng Sun, UC Boulder 3

4 Assess the Value of Marketing Research Information Decision without MR (step 1) Odds that MR will change the decision (step 2) Gain conditional on the change (step 3) Value of research (step 4) Previous example Invest the $10 mil elsewhere 50% $1 million $0.5 million This example Invest the money in the watermelon business Dr. Yacheng Sun, UC Boulder 4

5 One More Example 3M is evaluating a new product for the college students market. The estimated R&D cost for this product is estimated to be $20 million and the marketing cost is $5 million. Suppose with 1/3 of chance, the product will be a great success, bringing $90 million in revenue; with chance of 1/3 it will be a failure, bringing $15 million revenue, and with 1/3 it will be a disaster and will generate zero revenue. What is the value of the marketing research here? The answer is $11.67 million. Spend 3 minutes and try this example out yourself! Dr. Yacheng Sun, UC Boulder 5

6 1. Identify the status quo course of action without marketing research. Expected cost Expected revenue Status quo course of action Dr. Yacheng Sun, UC Boulder 6

7 2. Identify the scenario(s) in which marketing research will change the course of action and the odds for these scenarios. Dr. Yacheng Sun, UC Boulder 7

8 3. Determine the gain conditional on the relevant scenario(s). Dr. Yacheng Sun, UC Boulder 8

9 4. Multiply the conditional gain and the odds for the scenarios. Notice that in this case, there are 2 scenarios in which the research has the potential to change status quo course of action and be valuable. Thus, we need to calculate the expected value of the marketing research, accounting for both scenarios. Expected Revenue Dr. Yacheng Sun, UC Boulder 9

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11 MR Industry and Career in MR MKTG 3350: MARKETING RESEARCH Yacheng Sun Leeds School of Business Dr. Yacheng Sun, UC Boulder 11

12 Two types of organizations.. Client Organizations that provide information for decision makers within (typically) fortune 500 corporations. Companies that provide products and services to the consumer or business community. Spends on marketing - advertising and promotions budget. Supplier Organizations that provide research services to client organizations. These companies focus on providing marketing research services to client organizations. Sells to the client organizations. Dr. Yacheng Sun, UC Boulder 12

13 What companies represent each type? Client Dell Motorola Coca-Cola Ford Motor Company Microsoft Excel energy Roche Diagnostics Pizza Hut AT&T Crocs Supplier Lynx Research Consulting The MARC Group Burke Research Services Nielsen BASES IRI GFK Synovate TNS Research International (See Homomichl s list for the big ones ) Dr. Yacheng Sun, UC Boulder 13

14 What is great about each side? Client To the Supplier, you are the boss Industry expertise Internally, you are often the expert on research power! Researchers can make themselves into very strategic tools within their organizations There are some jobs available in the market very difficult to get in fresh. Supplier Variety you will work for a lot of different consultants, for a lot of different clients. A good client is a joy! For the consultant, there is the thrill of the hunt! Tend to be very flat organizations And the joy of teaching someone and seeing that glimmer of understanding! Dr. Yacheng Sun, UC Boulder 14

15 What sucks about each side? Client Inside the company, you have a lot of bosses all of your clients and your boss Many of your clients won t like the fact that they have to do research Research recommendations not implemented Researchers rarely ever get to be the president of a fortune 500 too bad! Supplier Client no matter how unrealistic (crazy, insane, etc) is your boss! No one appreciates your good work clients expect it and management expects you to sell (you are a god if you do and a dog if you don t) Long hours even a feeling of being in the bowels of the organization Lots of travel Dr. Yacheng Sun, UC Boulder 15

16 Possible Jobs in Marketing Research Dr. Yacheng Sun, UC Boulder 16

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21 A Typical Career Path in Market Research Company Associate Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings Project Lead Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings Analyst Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings Source: Grail Research Dr. Yacheng Sun, UC Boulder 21

22 A Typical Career Path in Market Research Company Project Manager Expert in one or more content areas or categories, overseeing the development of these skills across all of Grail Research Client Engagement Manager Group management Leading and managing talent within a group Project management Running 4 5 projects on both content and process side creating analytical plans, working with clients in ensuring high quality output for clients Associate Project Manager Solid expertise and experience in one or more content areas or categories Dr. Yacheng Sun, UC Boulder 22 Source: Grail Research

23 Compensation for market researchers 0 2 years of experiences 2 4 years of experiences 4 6 years of experiences 6 8 years of experiences Dr. Yacheng Sun, UC Boulder 23

24 Qualities of a Good Researcher Dr. Yacheng Sun, UC Boulder 24

25 Help manager to understand real problem Select among viable alternatives Dr. Yacheng Sun, UC Boulder 25

26 Fits technique to problem Dr. Yacheng Sun, UC Boulder 26

27 Good communication skills Dr. Yacheng Sun, UC Boulder 27

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29 Other Qualities Careful and conscientious Uses insider expertise Recognizes overt and covert purposes for marketing research Before doing research, knows Manager s decision rule Decision time horizon Impact of wrong decision Dr. Yacheng Sun, UC Boulder 29

30 Top Things Clients Want in a Research Company or Department Maintains client confidentiality Honesty Punctuality Flexibility Delivers against projects specifications Provides high-quality output Responsive to client s needs High quality-control standards Customer-orientated in interactions with client Keeps client informed throughout a project Dr. Yacheng Sun, UC Boulder 30

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