Page 317 - Introduction to Business

CHAPTER 8 Marketing Basics 291

ways to collect the information it wants. It could use personal interviews, a mail
questionnaire, or a telephone survey. We will assume that the firm elected to use
telephone interviews in which skilled interviewers would question former users as
to why they no longer use the product.
In data analysis, the major findings of the study are summarized, usually in
tables. In the floor cleaning example, lets assume the following results from the 200
people interviewed over the telephone:
Number of Percentage of
Respondents Respondents
Reasons for Not Purchasing Indicating Indicating
the Cleaning Product Reason Reason
The product did not do a good job
of cleaning the floors. 10 5.0
The product has a bad odor. 100 50.0
The product’s price was too high. 5 2.5
The product’s package was too
difficult to open. 25 12.5
The product’s package was not
attractive. 10 5.0
I found another product I liked better. 25 12.5
The product often was not available
at the store where I shopped. 25 12.5
Total 200 100.0

Once the marketer has data to look at, conclusions can be drawn as to whether
the hypothesis tested can be accepted. In this example, half of the people interviewed
stated that the offensive odor was the reason they stopped buying the product, and
all other reasons were indicated by much lower percentages of the respondents.
Thus, the company can confidently conclude that the product’s smell very likely
explains why its sales have been dropping.
Recommendations flow from the conclusions. In this example, the marketing
researchers would probably recommend that the company find some way to make
the cleaning product’s odor more acceptable.

Databases

Databases are banks of information companies have about their individual cus- databases Banks of information that
tomers. They reflect the realization by many companies that they no longer can be companies have about their individual
customers
successful by believing that all customers are equally valuable to them. Customer
databases are considered to be one of a company’s most important assets. As such,
they are viewed as a necessary investment. While current customers are the most
significant focus, prospects and former customers should also be included. Basic
information that should be in the database for current customers are name,
address, telephone number, products they have purchased, the value of their pur-
chases, and whether the purchase was in response to any promotional program.
With this information, companies can obtain three crucial measures of the value of
customers: recency of purchase, frequency of purchase, and dollar amount of total
purchases. Commonly referred to as RFM, recency, frequency, and dollar amount
are the data needed to calculate the lifetime value (LTV) of customers. The higher lifetime value (LTV) The future value of
the lifetime value, the more valuable a customer. a customer based on recency,
frequency, and dollar amount of past
By knowing how specific customers have responded to previous promotions,
purchases
companies can tailor future promotions to them. These data will indicate what
types of products and services should be offered, whether customers should
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