A 1) Answer

There could be many ways to conduct Market research in order to develop a new product.
However, keeping the case in view, following points could be noted:-

i. Create a focus group to learn in details about the likes and preference of its
potential customers. Interviewing focus group will also help us in designing
the experiment.
ii. Design the experiment: After learning the preference, we hypothesize certain
assumptions about our new product and design an experiment to check the
validity of our hypothesis.
a. Randomizing Sampling: To collect primary data and to ensure our data
represents the population accurately.
b. Methodology: Decide which statistical method to adopt that will accurately
find out what we are looking for.
c. Significance: To avoid type I and type II errors, decide the significance level
to help interpret the results and to verify its validity.
iii. Interpretation: This is the hardest part. As per the result obtain from the
experiment, meaningful inference is drawn which can be used for further
researches or in the new product design.

A 2) Answer

The first phase of market research was carried out in the following way

Management and Board meeting were conducted to decide on entering the particular
market segment. Duties was then assigned to Varghese to look in to the feasibility of
introducing these drinks and to present a report at the next board meeting.

Then few important questions were framed. These questions were required to formulate
appropriate segmentation strategy, devising positioning and marketing communication
strategy for each flavor, and to project stock-keeping estimates for each flavor with
respect to kind of store.

Accordingly, after consulting his CEO, Mr. John Mathai, he invited Mr. Sreejesh Menon,
Vice President (Research), India International Research Inc. (IIRI), a leading market
research firm, and posed his concerns to him. Menon discussed the concerns with his
research team and came out with a plan of study, which was approved by Varghese.

In the first phase, a series of focus group discussions were proposed to identify the
different flavors consumers like. Subsequent to resolving this issue, a series of
experiments were proposed to address the concerns of Varghese. The consumer
preference was to be measured through the respondent's rating of likelihood of purchase
based on tasting the drink on a 0 to 100 scale, with 0 representing “will not buy it at all”
and 100 representing “will surely buy it.”

To find out preferred flavor alternatives, IIRI conducted five focus group interviews, with
eight respondents in each group. Each group was homogeneous in composition with
respect to age but balanced with respect to gender (i.e., four members of each gender).
The groups were spread over the age group of 10 to 50 years, the major market segments.
The analysis of this exploratory investigation showed the feasibility of introducing three
different varieties of fruit-flavored drinks in their product line. These flavors were apple,
strawberry, and grape. These findings were available within ten days of study initiation
and they were reported to Varghese. He appreciated the quick work and asked the R&D
Department of the company to develop the three fruit-flavored soft drinks. The R&D
Department delivered the three drinks within a month. This conclude the first phase and
brought IIRI to its second phase of research—the taste tests under different experimental
conditions.

A 3) Answer

Random Sampling: To ensure the samples are randomized, every tenth participant
walking out the mall are approached and brief about the study and if the prospect
declined, the subsequent tenth person is approached.

Disguised Study: To prevent any kind of prior bias in reporting, both the name of the
market research agency and the client was not disclosed. Participants were randomly
allocated to the flavor and the flavor of the drink was not disclosed to them, thus blinding
the flavors from participants. They employed a double blind exercise to mitigate two
kinds of errors, namely subject error or error arising out of the inherent characteristics of
the respondent and the experimenter error or error arising out of the characteristics of
experimenter which could unduly influence the outcome.

Significance and sample size: Experiment with limited sample size, one should be willing
to allow both kinds of errors to a certain extent and that sample selection will be
determined based upon these considerations. To determine a feasible sample size for the
study, allowed percentage of type I and type II error are decided.

Mr. Menon and his team measure consumer preferences for different flavors in the
following way:-

i. Experiment 1: In the first experiment, they measured which flavor will be the
most preferred one from the give three flavors.
ii. Experiment 2: In the second experiment, they were looking for any difference
in preference for flavor with respect to gender
 iii. Experiment 3: The third experiment is to find clarity with respect to joint
influence of age and store type on preference of flavor.

A 4) Answer

Extraneous variable by its nature are those variable that we are not intentionally studying
in our experiment or test but has an effect on the outcome of the experiment. In the first
experiment, we are studying whether preference of flavor has any impact on purchase
likelihood. The outcome of this experiment arise a question whether preference for flavor
might differ with respect to gender. Hence, for the second experiment a new variable is
introduce in the experiment to account for gender. We can see that difference in purchase
likelihood of the drink between the gender is statistically significant, which shows male
are more likely to purchase then female. However, we can see that gender does not create
a statistically different preference in the flavor of the drinks. This is shown by the test of
between subjects effects. In the post hoc test we can see the difference in preference
between “Apple and Grape” and “Strawberry and Grape” are statistically significant.

A 5) Answer

Kinds of
Expt. Interaction Treatment Dependent Level of
experimental
Sl. No. effect if present variable variable Significance
design
Randomized No Interaction Purchase Significant at
1. Flavour of Drinks
Design effect present Likelihood the 0.05 level

Randomized No Interaction Flavour of Drinks Purchase Significant at

2.
Block Design effect present and Gender Likelihood the 0.05 level

Flavour of Drinks ,
Factorial Yes, Interaction Purchase Significant at
3. store type and age
Design effect present Likelihood the 0.05 level
group

B 1)

There aretThree factors used in the sample size calculation and thus, determine the
sample size for simple random samples.

These factors are: 1) the margin of error, 2) the confidence level, and 3) the proportion
Each one of these is discussed below in reference to the case study.
i. The margin of error: (also referred to as the confidence interval) measures the precision
with which an estimate from a single sample approximates the population value. A
margin of error will get narrower as the sample size increases. The margin of error
selected depends on the precision needed to make population estimates from a sample.
For this case study this was taken as 5%.

ii. The confidence level: It is the estimated probability that a population estimate lies
within a given margin of error. Confidence levels are also closely related to sample size.
As the confidence level increases, so too does the sample size. A researcher that chooses
a confidence level of 90% will need a smaller sample than a researcher who is required to
be 99% confident that the population estimate lies within the margin of error. Here in the
case study confidence interval is taken as 95%.

iii. The proportion: Proportion(or percentage) of a sample that will choose a given answer
to a survey question is unknown, but it’s necessary to estimate this number since it is
required for calculating the sample size. For a test to detect extremely small difference
between the preferences, small effect size was to be considered (= 0.10), to detect medium
and large differences, effect sizes of 0.25 and 0.40 were to be considered (based upon
Cohen's criteria (Cohen, 1988)). To detect small effect size, a large sample had to be
recruited and vice versa. Hence for this study, 0.40 was considered as a Menon prefers
large effect size.

B 2) Answer

Hypothesis for the three experiment mentioned on the case are as follows:

Experiment 1: Null Hypothesis, H01: µa=µs=µg Meaning flavor of the drink has no
significant impact on purchase likelihood of the drink. Here µa, µs and µg represent the
mean of purchase likelihood of Apple flavor, strawberry flavor and grape flavor
respectively.

Experiment 2: Null Hypothesis, H02: Gender has not significant impact on flavor
preference.

Experiment 3: Null Hypothesis, H03: Age and store type has no significant impact on
flavor preference.

B 3)

Interaction effects occur when the effect of one variable depends on the value of another
variable. Interaction effects are common in regression analysis, ANOVA, and designed
experiments. In any study, whether it’s a taste test or a manufacturing process, many
variables can affect the outcome. Changing these variables can affect the outcome
directly. Analysts use models to assess the relationship between each independent
variable and the dependent variable. This kind of an effect is called a main effect.
However, it can be a mistake to assess only main effects. The independent variables might
interact with each other. Interaction effects indicate that a third variable influences the
relationship between an independent and dependent variable. This type of effect makes
the model more complex, but if the real world behaves this way, it is critical to incorporate
it in your model. Interaction effects represent the combined effects of factors on the
dependent measure. When an interaction effect is present, the impact of one factor
depends on the level of the other factor. Part of the power of ANOVA is the ability to
estimate and test interaction effects. Post Hoc tests can reveal which pair of cell are
significant. Simple effect test also can detect interaction effects. This approach essentially
breaks the interaction effect into component parts and then tests the separate parts for
significance. Another alternative to the procedures above is the use of planned
comparisons instead of the omnibus F test for the interaction. These procedures can also
be implemented using the oneway procedures described above

C Answers

Outcome of the Experiments are as follows:

Experiment 1: Preference of Apple and Strawberry flavor is more likely to be purchased

than grape flavor.

Experiment 2: Though male are more likely to purchase the drink then female, there is no
statistical difference in preference of flavor between male and female.

Experiment 3: Store type, age and Flavor of the drink have statistically significant impact
on the purchase likelihood of the drink.

In Bakeries store, Grape flavor drink are more likely to be purchased than apple or
strawberry flavor by people of age group less than 25 years. People older then 25 years
are less likely to purchase the drink of any flavor.

Mom and Pop Stores: Apple Flavor drink are more likely to be purchased than
Strawberry or grape flavor by people of both the age group. People of both age group are
equally likely to purchase the apple flavor drink.

Supermarkets: Comparatively Grape flavor are more likely to be purchased then Apple
flavor or strawberry flavor. However as a whole likelihood of purchase of all flavors are
significantly low in this store.

Of the three stores, people of age group below 25 years coming to bakeries store are most
likely to purchase Grape flavor drinks than apple or strawberry flavored drinks.
However, likelihood of purchase of the other two flavor by people below 25 years is also
higher in this store than Mom and pop stores and supemarket