Chapter Four Secondary Data
Chapter Four Secondary Data Chapter Objectives • Compare the advantages of secondary data and primary data • Identify the limitations of secondary data in terms of their relevance and accuracy • Distinguish between (1) original and secondhand sources of secondary data and (2) internal and external sources of secondary data Copyright © Houghton Mifflin Company. All rights reserved. 4|2 Chapter Objectives (Cont’d) • Explain why secondary data management is increasingly important • Define marketing information system and describe its basic components Copyright © Houghton Mifflin Company. All rights reserved. 4|3 What Do These Companies Have in Common ? Pure and Persil detergent Cadbury Chocolates Huggies Diapers Birds Eye Fish Sticks • Different products, different companies, one common database Copyright © Houghton Mifflin Company. All rights reserved. 4|4 Secondary Data • Data collected for a purpose other than the research situation at hand • Advantages – – – – Cost and time Availability Less expensive Less time intensive Copyright © Houghton Mifflin Company. All rights reserved. 4|5 Using Secondary Data: Advantages • Readily available – – – – Whirlpool warranty card Nielsen/Net Ratings U.S. Census Bureau Statistics Copyright © Houghton Mifflin Company. All rights reserved. 4|6 Disadvantages of Secondary Data • Relevance: may not match the data needs of a given project. – Measurement units – Differences in category definitions – Time Period Copyright © Houghton Mifflin Company. All rights reserved. 4|7 Secondary Data: Small Business Application • Market Research for a small business: You want to start a pool and spa cleaning and repair service • How do you find out about market size and competition? Copyright © Houghton Mifflin Company. All rights reserved. 4|8 Secondary Data Relevance: Measurement Units • Carpets Unlimited manufactures a variety of carpets • Sentinel Corporation produces a line of smoke detectors • U.S. Census of Population and Housing Data can be used to estimate the total residential market potential for their products in different sections of the country Copyright © Houghton Mifflin Company. All rights reserved. 4|9 Secondary Data Relevance: Measurement Units (Cont’d) • Carpets Unlimited requires size data expressed in square feet • Sentinel Corporation requires size data expressed in number of rooms per household • U.S. Census of Population and Housing data – Useful to Sentinel Corporation but not useful for Carpets Unlimited Copyright © Houghton Mifflin Company. All rights reserved. 4 | 10 Digital BabySitter Digital BabySitter.com website Copyright © Houghton Mifflin Company. All rights reserved. 4 | 11 Digital BabySitter (Cont’d) • Specializes in making digital baby monitor devices • Wants to expand beyond the United States – Based on birthrates provided by the United Nations (www.un.org), the company decided to target China and India – Obtained information on computer penetration in urban areas and chose urban populations as its target market Copyright © Houghton Mifflin Company. All rights reserved. 4 | 12 Digital BabySitter (Cont’d) • Secondary Data Analysis is not meaningful in China and India because children are either with their extended families or at school – Children are almost never alone – Secondary data is not always relevant!!! Copyright © Houghton Mifflin Company. All rights reserved. 4 | 13 Secondary Data Is Not Always Reliable • GOJO launched Purell as an "instant hand sanitizer" – Walgreen’s positioned it as a skin care/first aid product (cleans without water) – Nielsen and Information Resources Inc. (IRI) categorized it as liquid soap – Sales varied by location • Is it a liquid soap or hand sanitizer? What is it? • Category mismatches make the secondary data not always reliable Copyright © Houghton Mifflin Company. All rights reserved. 4 | 14 Problems with Census Data • Category mismatch • Changes in category definition • The time period during which secondary data were collected • Using data that are too old Copyright © Houghton Mifflin Company. All rights reserved. 4 | 15 The Numbers Game • THE SHOCKING TRUTH IS THAT STATISTICS ARE ONLY AS CREDIBLE AS THE SOURCES THAT PRODUCE THEM! Copyright © Houghton Mifflin Company. All rights reserved. 4 | 16 Spam Projections Which Numbers to Use? 2002 2004 19% 84% Brightmail 39 65 Postini 60 78 Frontbridge 40 82 Message Labs Copyright © Houghton Mifflin Company. All rights reserved. Many accept the above projections without questioning their validity, even when the projections differ by billions of dollars across the competing studies 4 | 17 Secondary Data Limitations • Accuracy – Who collected the data? – Why was the data collected? – How was the data collected? Copyright © Houghton Mifflin Company. All rights reserved. 4 | 18 Types and Sources of Secondary Data • Internal Sources – Company held information • External Sources – – – – Government Syndicated Sources Trade Associations Miscellaneous Sources Copyright © Houghton Mifflin Company. All rights reserved. 4 | 19 Exhibit 4.1 Flow Diagram for Conducting a Data Search Copyright © Houghton Mifflin Company. All rights reserved. 4 | 20 Secondary Data: Internal vs. External • Manager of McDonald's wants to know the effect of the company's tie-in with movies like Shark Tales • Should the manager purchase this syndicated service from the marketing research firm? Copyright © Houghton Mifflin Company. All rights reserved. 4 | 21 Internal Data • Internal data can often be obtained with less time, effort, and expense than external secondary data • May have relevance to the research being conducted • Examples include – A firm’s historical record of sales – A public service association’s list of donors – Public opinion polls conducted in the past by a political candidate’s campaign office Copyright © Houghton Mifflin Company. All rights reserved. 4 | 22 External Data: Government Sources • Collects extensive data about people, firms, markets, and foreign countries; more than any other secondary data source • Data collected is readily available on Internet sites • Documents published are in the form of summary reports based on the raw data collected • The raw data is often available for a fee – Public-Use Microdata files Copyright © Houghton Mifflin Company. All rights reserved. 4 | 23 Syndicated Sources • Syndicated services offered by marketing research firms – Nielsen Retail Index • Fees are required but they are more cost effective than collecting primary data • Focus directly on the needs of decision makers • Updated more frequently than government data Copyright © Houghton Mifflin Company. All rights reserved. 4 | 24 Syndicated Sources (Cont’d) • Often allows for customization – Roper reports • Supermarkets are also a valuable source for secondary data Copyright © Houghton Mifflin Company. All rights reserved. 4 | 25 Trade Associations • Very numerous and diverse • Many collect data relevant to and about their members • Also collect competitively sensitive data about members that may not be available to industry outsiders Copyright © Houghton Mifflin Company. All rights reserved. 4 | 26 Competitive Intelligence: FIND/SVP Helps Clients • Industrial products and services company facing a worldwide market decline • Approached FIND/SVP (a leading knowledge services company) to compare its plant manufacturing strategy and costs with those of competitors • FIND/SVP – Undertook a market scan of published information on competitors’ plants – Obtained Environmental Protection Agency (EPA) documents Copyright © Houghton Mifflin Company. All rights reserved. 4 | 27 Competitive Intelligence: FIND/SVP Helps Clients (Cont’d) • Based on FIND/SVP's analysis, the industrial products and services company was able to assess cost structures of its competitors and develop benchmarks for quality, employee performance, and utility costs Copyright © Houghton Mifflin Company. All rights reserved. 4 | 28 Competitive Intelligence: Burger King Corp • Burger King – Maintains a brand research library and subscribes to analyst reports that provide a detailed view of competitors' financial and long-term plans – Gathers syndicated reports that provide sales and cost data and describe the competition's growth plans – Insights about the restaurant business can be flushed out from interviews with restaurant business leaders, published routinely in these trade journals Copyright © Houghton Mifflin Company. All rights reserved. 4 | 29 Managing Secondary Data • Merely keeping abreast of all the available data without being overwhelmed is a challenge • Effective secondary-data management is necessary in this "information explosion" age Copyright © Houghton Mifflin Company. All rights reserved. 4 | 30 Ad Hoc Research Projects • Discrete, situation specific projects that are initiated and completed in response to a particular question, or set of related questions, raised by a decision maker Copyright © Houghton Mifflin Company. All rights reserved. 4 | 31 Evolution of MkIS Ad Hoc Marketing Research Copyright © Houghton Mifflin Company. All rights reserved. Stage 1 Marketing Information System 4 | 32 Full-fledged Marketing Information Systems • Data warehouse information storage and retrieval system • Marketing decision support systems – Data Mining – Data Modeling • Expert systems Copyright © Houghton Mifflin Company. All rights reserved. 4 | 33 Exhibit 4.2 A Hotel Chain’s Marketing Information System Copyright © Houghton Mifflin Company. All rights reserved. 4 | 34 Marketing Information Systems (MkIS) • A continuing and interacting structure of people, equipment, and procedures designed to gather, sort, analyze, evaluate, and distribute pertinent, timely, and accurate information to marketing decision makers Copyright © Houghton Mifflin Company. All rights reserved. 4 | 35 Data Warehousing • A centralized database, which consolidates enterprise-wide data from a variety of internal and external sources • An architecture, which allows individuals to query and generate ad hoc reports in order to perform an in depth analysis Copyright © Houghton Mifflin Company. All rights reserved. 4 | 36 Exhibit 4.4 A Typical Data Warehouse Operation Copyright © Houghton Mifflin Company. All rights reserved. 4 | 37 Exhibit 4.5 Database Model (Dimensional Model) Copyright © Houghton Mifflin Company. All rights reserved. 4 | 38 7-Eleven's Information System Helps in Forecasting • 7-Eleven Inc. installed an inventory management/sales data system in all of its 5,600 franchisee and company-owned stores nationwide • The system provides item-by-item sales data allowing managers to determine which of the 2,500 products they carry are selling well Copyright © Houghton Mifflin Company. All rights reserved. 4 | 39 7-Eleven's Information System Helps in Forecasting (Cont’d) • The system also alerts managers about upcoming events and news that could affect which items will be in demand • Information system thus helps 7-Eleven in sales forecasting and in collaborative product development with suppliers Copyright © Houghton Mifflin Company. All rights reserved. 4 | 40 Cover Concepts: Database • A producer of book jackets with corporate advertising on the cover • Cover Concepts covered schools' books with free jackets carrying advertisements and interesting messages that appealed to kids, providing national advertisers with a costeffective way to reach the 6-to-18-year-old market Copyright © Houghton Mifflin Company. All rights reserved. 4 | 41 Cover Concepts: Database (Cont’d) • Company's database has grown from 55 Boston-area schools in 1989 to 31,000 schools (out of a total of 85,000) and more than 21 million kids nationwide • Cover Concepts gathers the database's extensive demographic information, which it updates yearly, from the elementary, junior high, and high schools themselves, as well as from the Census Bureau, private database companies, and other sources Copyright © Houghton Mifflin Company. All rights reserved. 4 | 42 Evolution of MkIS Ad Hoc Marketing Research Stage 1 Marketing Information System Stage 2 Decision Support System Copyright © Houghton Mifflin Company. All rights reserved. 4 | 43 Marketing Decision Support System (MDSS) • Definition: An MkIS that permits managers to request special types of data analyses or reports on an as-needed basis – Interactively generates “What if...” scenarios Copyright © Houghton Mifflin Company. All rights reserved. 4 | 44 Data Mining • The process of digging deep into immense amounts of data to extract valuable and statistically valid information – IBM Intelligent Miner – Angoss Software’s Knowledge STUDIO Copyright © Houghton Mifflin Company. All rights reserved. 4 | 45 Applications of Data Mining • Companies -Telecommunications • Benefits – Segmentation of prospective customers to increase new customer accounts at the same time reducing cost per account – Understanding individual customer preferences and needs to deliver relevant long distance products and services Copyright © Houghton Mifflin Company. All rights reserved. 4 | 46 Applications of Data Mining (Cont’d) • Companies - Insurance • Benefits – Improving profitability through timely valuation of insurance products – Effective financial data management by balancing market, regulatory, and insurance pressures to provide superior customer/patient care Copyright © Houghton Mifflin Company. All rights reserved. 4 | 47 Applications of Data Mining (Cont’d) • Company - High Tech Design • Benefits – Profitability analysis and product life cycle planning leading to increased focus on non traditional customer segments thereby expanding the market Copyright © Houghton Mifflin Company. All rights reserved. 4 | 48 Applications of Data Mining (Cont’d) • Companies - Retail • Benefits – Demographic analysis, financial planning, and forecasting, leading to precise buying, merchandising and marketing – Improving profitability through optimal shelf space allocation – Tighter end-to-end integration of internal as well as vendor systems, leading to better inventory and merchandise management – Reducing returns and thereby improving margins Copyright © Houghton Mifflin Company. All rights reserved. 4 | 49 Applications of Data Mining (Cont’d) • Companies - Banking • Benefits – Consumer intelligence helps create new products and manage collections while containing delinquency rates – Profitability analysis by customer segments – Market penetration through personalized promotion strategies Copyright © Houghton Mifflin Company. All rights reserved. 4 | 50 Marketing Decision Support Systems: Models • A marketing response function is a mathematical model that represents the relationship between marketing input and output variables Copyright © Houghton Mifflin Company. All rights reserved. 4 | 51 MDSSs: Retail Databases • Scanner-based databases allow retailers and packaged goods manufacturers to monitor and analyze sales trends: – Changes in brand shares – Shifts in consumer preferences • Information Resources, Inc.’s BehaviorScan and Nielsen’s Scantrack capture scanner data from many retailers Copyright © Houghton Mifflin Company. All rights reserved. 4 | 52 Exhibit 4.7 Data Captured in a Single Source Data Base Copyright © Houghton Mifflin Company. All rights reserved. 4 | 53 Evolution of MkIS Ad Hoc Marketing Research Marketing Information System Stage 2 Stage 3 Decision Support System Expert System Copyright © Houghton Mifflin Company. All rights reserved. Stage 1 4 | 54 Expert System (ES) • An MDSS that proactively makes managers aware of market situations warranting their attention • An MDSS can recommend appropriate courses of action – Artificial intelligence is utilized Copyright © Houghton Mifflin Company. All rights reserved. 4 | 55 Expert System (ES) (Cont’d) • 7 - Eleven Maximizes Space and Selection – Alerts store managers and suggests how to reallocate shelf space to maximize profits from nutritional snack bar sales – Uses its expert system to determine the best allocation of shelf space among the various products it sells – Analyzing sales, cost, and promotional data, the system translates the results into “Plan-a-Grams,” printouts that show store managers, shelf by shelf, exactly where to place their stock to maximize profit Copyright © Houghton Mifflin Company. All rights reserved. 4 | 56
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