Marketing Research

1. Chapter 2
The Role of Research in
Marketing

2. Objectives
To understand
• the link between different kinds of marketing decisions and
marketing research
• the requirements of good research at various stages of the
marketing decision process
• factors determining the decision to use marketing research-
cost vs benefits of marketing research

3. Introduction
• The decision to undertake research involves decisions on
a) Possibility of decision without research
a) Kind of research needed
a) Time required for research =>Can the marketing
decision await the results of research?
d) Costs involved in research
e) Net value added by research

4. • Managers need to make decisions under three levels of
uncertainty:
1. Certainty: Here the possible outcomes of various
courses of action or decision are completely known.
1. Risk: Here each of many possible outcomes of the
different courses of action have a known, but less than
hundred percent probability of occurrence.
Problem–Solving vs. Opportunity
Definition Research

5. …contd.
3. Uncertainty: Here the probability of occurrence of any one
of many possible outcomes of the different courses of action is
not known.
Sources of uncertainty :external or internal.
Life-cycle stage of product and organization influences type of
uncertainty:
(a) new markets/ products opportunity research
(b) established markets/ products problem research
Problem–Solving vs. Opportunity
Definition Research

6. Marketing research provides decision rules that reduce
the decision- risk by reducing various types of uncertainty.
Information required for solving managerial dilemma:
• The decision maker (s) and his ( their ) objectives
• The context of the problem
• Alternative courses of action
• Consequences of Alternative Courses of Action
• Appropriate design of research
KNOWLEDGE
SKILLS
HUMAN RESOURCES
FUNDS
INTERNAL
COMPETITION
MARKET GROWTH
UNFAMILIARITY WITH THE MARKET
GOVERNMENT POLICIES
EXTERNAL
FACTORS INFLUENCING UNCERTAINTY IN
MARKETING DECISIONS

7. Decision Making Perspective :
Bayesian Decision Theory
• Decision to undertake research dependent on time and
cost of research =>
• Bayesian decision theory based on six concepts:
prior analysis: the process of decision-making about
financial implications on the basis of decision-
maker’s judgment.
posterior Analysis: the process of decision making about
the most profitable option on the basis of other sources
of new information
conditional probability : the probability of occurrence of
an event A, given that another event B has already
occurred.

8. …contd.
marginal Probability: The total probability P (A/B) of the
event A occurring , given that the all possible values that
event B could take have been taken into account.
perfect information: Complete and accurate information
about the consequences of the various alternatives being
considered, leading to zero risk.
expected value of perfect information (EVPI): total of each of
the payoffs multiplied by the prior probability that additional
information will reveal the true state. The net gain from
market research is
= Expected value of additional information--Cost of acquiring it
Decision Making Perspective :
Bayesian Decision Theory