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McDaniel & Gates – Marketing Research Essentials, 8th Edition Instructor’s Manual
CHAPTER 8
LEARNING OBJECTIVES
1. To understand the nature of experiments.
2. To gain insight into requirements for proving causation.
3. To learn about the experimental setting.
4. To examine experimental validity.
5. To learn the limitations of experimentation in marketing research.
6. To compare types of experimental designs.
7. To gain insight into test marketing.
KEY TERMS
Experiment Randomization
Causal research Physical control
Concomitant variation Design control
Appropriate time order of occurrence Statistical control
Elimination of other possible causal Experimental design
factors Treatment variable
Laboratory experiments Experimental effect
Field experiments Contamination
Internal validity Pre-experimental designs
External validity One-shot case study design
History One-group pretest-posttest design
Maturation True experimental design
Instrument variation Before and after with control group
Selection bias design
Mortality After-only with control group design
Testing effect Quasi-experiments
CHAPTER SCAN
This chapter examines experimentation, a method of primary marketing research. An experiment
occurs when the researcher changes or manipulates an independent variable in order to observe
its effect on a dependent variable. Experiments typically intend to prove causation. Experiments
can be conducted in a laboratory or in a field setting. When conducting an experiment, the
researcher hopes to prove causation of one variable on another. Doing so involves showing that
changes in the causal variable temporally precede changes in the dependent variable, that
changes in the causal variable are accompanied by changes in the dependent variable, and that
extraneous factors that could also cause a change in the dependent variable have been controlled.
There are several different experimental designs, each with its own advantages and
disadvantages. One type of experimentation that is often used in marketing research is the test
market. Test markets involve introduction of a product into certain marketplaces, controlling for
exposure to promotion and advertising, and observing the reactions of consumers. Test
marketing is very expensive and must be considered carefully. There are six steps in a test
market study: 1) Define the objective; 2) Select a basic approach; 3) Develop detailed procedures
for the test; 4) Select markets for the test; and 5) Execute the plan; and 6) Analyze the test
results.
CHAPTER OUTLINE
1. What Is An Experiment?
I. Experiment Defined
2. Demonstrating Causation
I. Causal Research
A. Causal Research Defined
B. Requirements to Demonstrate Causation
C. Scientific Definition–Causation and Causality
II. Concomitant Variation
4. Experimental Validity
I. Validity
A. Validity Defined
II. Validity of a Measure
A. Validity of Measure Defined
B. Two Types of Validity
5. Experimental Notation
I. Standard System of Notation
A. X = Treatment
B. O = Observation
C. Different time periods
6. Extraneous Variables
I. Examples of Extraneous Variables
A. History
B. Maturation
C. Instrument Variation
D. Selection Bias
E. Mortality
F. Testing Effects
G. Regression to the Mean
II. Controlling Extraneous Variables
A. Confounding Variables
B. Four Basic Approaches to Control Extraneous Factors
11. Summary
CHAPTER SUMMARY
1. WHAT IS AN EXPERIMENT
I. Experiment
A. Experiment Defined—the researcher is an active participant in the process, the research
changes or manipulates one thing (called an experimental, treatment, independent, or explanatory
variable), to observe what effect the change has on something else (referred to as a dependent
variable)
2. DEMONSTRATING CAUSATION
I. Causal Research
A. Causal Research Defined - research that has the potential to demonstrate that a change in
one variable causes some predictable change in another variable
B. Requirements to Demonstrate Causation
1. Concomitant variation (correlation)
2. Appropriate time order of occurrence
3. Elimination of other possible causal factors
C. Scientific Definition–Causation and Causality
1. Popular view–X is only one of a number of determining conditions that caused the observed
change in Y
2. Scientific view–X can be a cause of Y if the presence of X makes the occurrence of Y more
probable
3. One cannot definitively prove that X is a cause of Y but only infer that a relationship exists
4. Causal relationships are inferred rather than demonstrated conclusively beyond a shadow of a
doubt
II. Concomitant Variation
A. Concomitant Variation (Correlation)–evidence that A and B vary together in some
predictable fashion, either a positive or an inverse relationship might exist.
B. Causation–concomitant variation by itself does not prove causation; there must be true
correlation. To infer causation, you must be able to show correlation–but correlation alone is not
proof of causation
3. EXPERIMENTAL SETTING
I. Laboratory Experiments
A. Laboratory Experiments Defined–experiments conducted in a controlled setting
B. Advantages
1. Control for extraneous causal factors
2. Can focus on the first two elements–concomitant variation and appropriate time order of
occurrence
3. Greater internal validity
C. Disadvantages
1. Results not directly transferrable to the actual marketplace
2. Problems with external validity
II. Field Experiments
A. Field Experiments Defined–tests conducted outside the laboratory, such as a marketplace
B. Advantages
1. Creates realism of the environment
C. Disadvantages
4. EXPERIMENTAL VALIDITY
I. Validity
A. Validity Defined–degree to which an experiment actually measures what the researcher is
trying to measure.
II. Validity of a Measure
A. Validity of a Measure Defined– depends on the extent to which the measure is free from
both systematic and random error
B. Two Types of Validity
1. Internal Validity–the extent to which competing explanations for the experimental results
observed can be ruled out
2. External Validity–the extent to which the causal relationships measured in an experiment can
be generalized to outside persons, settings, and times
5. EXPERIMENTAL NOTATION
I. Standard System of Notation
A. X–indicates the exposure of an individual or a group to an experimental treatment.
1. Experimental Treatment–the factor whose effects we want to measure and compare. Factors
such as:
a. Different prices
b. Package designs
c. Point-of-purchase displays
d. Advertising approaches
e. Product forms
B. O (for observation)–refers to the process of taking measurements on the test units.
1. Test Units–individuals, groups of individuals, or entities whose response to the experimental
treatments is being tested
C. Different time periods–represented by the horizontal arrangement of the Xs and Os. For
example,
O1 X O2
describes an experiment in which a preliminary measurement O1 was taken of one or more test
units, then the test units were exposed to X, and then a measurement O2 was taken.
1. Xs and Os can be arranged vertically to show simultaneous exposure and measurements of
different test units–two groups of test units received different experimental treatment at the same
time–two groups were measured simultaneously
X1 O1
X2 O2
6. EXTRANEOUS VARIABLES
I. Examples of Extraneous Variables
A. History–the intervention, between the beginning and end of the experiment, of any variable
or event–other than those manipulated by the researcher (experimental variables)–that might
affect the value of the dependent variable
B. Maturation–changes in subjects throughout the course of the experiment that are a function
of time: it includes getting older, hungrier, more tired, and the like
Consumers have limited budgets and consumption capacities, so when companies want to make
changes to a product line, managers want to know how those changes would affect the choices
people make within the category. To find out, marketers often use the “top-box” measurement
tool of purchase intent. A survey using top-box presents a given product that respondents will
rate on a scale typically ranging from “definitely will buy” to “definitely will not buy.” A clear
response would seem to provide the information a manager would need.
Questions:
1. Do you think top-box measurement would be more accurate if only one option were presented
rather than multiple options? Why or why not?
2. Do you think any marketing research method can accurately predict action rather than simply
assess desire?
2. Step Two: Select a Basic Approach–the appropriate type of test market method should be
selected. There are four basic approaches:
a. Standard, or traditional, test market
b. Scanner or electronic test market
c. Controlled test market
d. Stimulated test market
3. Step Three: Develop Detailed Test Procedures–manufacturing and distribution decisions
must be made to ensure that adequate product is available and that it is available in most stores of
the type that sell that particular product class.
4. Step Four: Select Test Markets–a number of factors must be taken into account in making
this decision. First there are the overall standards:
a. There should be a minimum of two test markets, in addition to a control market, for an
existing national brand, or a minimum of three markets for testing a new brand
b. The markets selected should be geographically dispersed; if the brand is a regional brand, the
markets should cover several dispersed markets within that region
c. Markets should be demographically representative of the United States, unless, for instance, a
pronounced ethnic skew is desirable for a specific brand
d. Depending on the product purchase cycle, the test should be run for at least six months, or up
to 12 months, before the results can be considered reliably projectable.
e. The market must have a variety of media outlets, including at least four television stations,
cable penetration no more than 10 percent above or below the U.S. average, at least four radio
stations, a dominant local newspaper with daily and Sunday editions, a Sunday supplement with
a syndicated edition, or a local supplement of similar quality
f. There should be a dominant newspaper in the market or a dominant newspaper in each city the
market encompasses
g. The market should be as reflective as possible of the U.S. population or regional population if
that is more appropriate for the particular test
5. Step Five: Execute the plan–researcher can now begin execution–but a key decision has to
be made–how long should the test run? The average test runs for 6 to 12 months.
6. Step Six: Analyze the Test Results–the data produced by an experiment should be evaluated
throughout the test period. After completion of the experiment, a more careful and thorough
evaluation of the data must be performed. This analysis will focus on four areas:
a. Purchase data
b. Awareness data
c. Competitive response
d. Source of sales
VI. Other Types of Product Tests
A. Rolling Rollout–product is launched in a certain region rather than in one or two cities
B. Lead Country Strategy–try a product out in a foreign market before rolling it out globally
See Practicing Marketing Research: Quick Scans of Product-Specific Test Markets (p. 199)
• Miller Brewing Company of Milwaukee, Wisconsin, test marketed three kinds of low-calorie,
craft-style light beers in only four cities starting in 2008, including Minneapolis, Minnesota;
Charlotte, North Carolina; San Diego, California; and Baltimore, Maryland.
• Fuller’s, a London brewery founded in 1711, selected Denver, Colorado, as the premium
United States locale to test market its high-end London Pride beer.
• Anheuser-Busch is test-running its Purus vodka, distilled in Italy and fetching $35 a bottle
retail, in Boston, New York, Washington, and Annapolis.
• International Restaurant Concepts of Lakewood, Colorado, selected Provo, Utah to test market
its Tucanos Brazilian Grill steakhouse.
Discussion Questions:
1. What characteristics do the cities of Minneapolis, Charlotte, San Diego, and Baltimore possess
that make them good markets for introducing premium-level beers?
2. How would you tailor a test market experimentation for Brazilian cuisine in a Mormon-
saturated region whose members nonetheless are well-traveled and versed in Brazilian foods?
11. SUMMARY
1. Divide the class into as many as six groups, as appropriate. Each group will have the task
of recommending a test market design and addressing the associated questions for one of
the following scenarios.
• Design a test of a new pricing strategy for orange juice concentrate. The brand is an
established brand, and we are only interested in testing the effect of a 5 percent price
increase and a 5 percent price decrease. All other elements of the marketing mix will
remain the same.
Randomly select three experimental groups. Expose Group 1 to the product at the 5
percent price increase, expose Group 2 to the 5 percent price decrease, and expose Group
3 (the control group) to the original price. Use a questionnaire to measure post-test
attitudes about product pricing and purchase intentions.
• A soft drink company has determined in taste tests that consumers prefer the taste of their
diet product when sweetened with Splenda in comparison to Equal. Now they are
interested in determining how the new sweetener will play in the marketplace. Design a
test market that will achieve this goal.
Select four test market cities. Offer the soft drink sweetened with Splenda in two test
markets, and sweetened with Equal in two test markets. Try to match markets as closely
as possible to minimize the effect of extraneous variables. Compare the results on a daily
basis for at least 90 days. This should be a pretty important decision because the cost of
test marketing can run into the millions of dollars. Perhaps a similar design could be used
employing simulated test markets. The cost would be much lower.
• A national pizza chain wants to test the effect on sales of four different discount coupons.
Design a test that will do this in a way that gives a clear read. Your focus should be on
the effect on sales volume. Financial analysis after the test results are in will address the
revenue and profit impact.
Randomly select five experimental groups. Distribute Coupon A to one group, Coupon B
to a second group, and so on. The fifth group, the control group, would get no coupon.
Compare the pizza purchase and coupon redemption rates of the five groups. One thing to
watch for would be whether subjects who received a particular coupon actually use it as
part of the purchase process. Compare results for the five groups to see which makes the
largest number of pizza purchases.
• A national value-priced hotel chain needs to understand the business impact of including
a free buffet-style breakfast to guests. Design and justify a test that will do this. Do some
preliminary investigation to determine what items the target market of guests would
prefer in a breakfast buffet. Do a follow-up survey to get a preliminary idea of the impact
on purchase behavior the buffet might have. Will there be any change in price? Once it
has been established that guests in the target market would want the breakfast buffet, a
test market could be conducted to see “real” results.
Select six hotels from the chain that are as much alike as possible. Capture demand
statistics for the year prior to the test. Assign three of the units as test sites (offer the
breakfast buffet) and three units as control sites (no buffet). Continue to measure demand
for another six-month period. Compare pre-test and test market performance of the six
properties. Differences in demand may be due to the availability of the breakfast buffet.
• A credit card company needs to test its strategy for attracting college students to its card.
It is going to continue using booths in student unions and other high-traffic campus
locations. It has been offering free CDs from a list to those who sign up for its card, but
since other card companies are using this approach, the company wants to try some
alternatives. It is considering free MP3 downloads from iTunes and T-shirts featuring
popular music groups.
Design a test that will tell the company which option to choose if its goal is to increase
sign-ups by the largest amount. This requires a multiple group experiment. Initial surveys
could give management a good idea about which (if any) premium offer is considered
attractive by the target market. If the results seem promising, a more elaborate test should
be considered. Randomly assign three sites to offer CDs, another three to offer the MP3
downloads, another three to offer T-shirts, and a control group of three locations that
offers no incentive premiums. Track performance for at least 90 days. Comparative
analysis would indicate which premium is associated with the greatest signup rate.
2. Tico Taco, a national chain of Mexican fast-food restaurants, has developed the “Super
Sonic Taco,” which is the largest taco in the market and sells for $1.19. Tico Taco has
identified its target customers for this new product as men under 30 who are not concerned
about health issues, such as fat content or calories. It wants to test the product in at least
four regional markets before making a decision to introduce it nationally. Which cities
would you recommend using? Why would you recommend these cities?
Test cities should be chosen to represent the targeted market. This would mean finding cities that
have a large population of non-health-conscious men under age 30. Also, these cities should be
dispersed geographically to try to control for regional cultural differences. One important
question is whether there are cultural—therefore regional—tastes for tacos. The chosen cities
might include Austin, Texas; Chapel Hill, North Carolina; Berkeley, California; and Lincoln,
Nebraska. These cities would be chosen because they are of medium size and presumably have a
significant number of men in the target market. This could be verified by census reports of
population distributions. Attitudes toward health issues would be more difficult to pinpoint.
Experimentation is the only method of marketing research that can consistently meet the three
prerequisites for causation, concomitant association, appropriate time order of sequence, and
elimination of other possible causal factors.
4. What are some of the important independent variables that must be dealt with in an
experiment to test consumer reaction to a pilot for a new TV series? Explain why these
variables are important.
What cities will be used for the test? How will the material be presented—in a studio, in peoples’
homes, at a gala grand opening? Who are we going to select as the target market? What sort of
measures of audience reaction will we employ? Do we want to measure audience reaction right
after the screening, or do we want to wait to measure delayed reaction? At what time of day will
these screening tests be conducted? What day of the week?
5. Managers of the student center at your university or college are considering three
alternative brands of frozen pizza to be offered on the menu. They only want to offer one of
the three and want to find out which one students prefer. Design an experiment to
determine which brand of pizza the students prefer.
The student center could use several types of experimental design. One appropriate method
would be a pretest-posttest with control group. Students could be randomly assigned to the
experimental group and control group. First, students in both groups would be asked for their
preference for pizza brand. Then the experimental group would taste all three brands, and then
both groups would be asked again their preference for brand. A more complex design would be
to have three experimental groups taste and rate just one brand of pizza. Compare the three
aggregate scores.
6. Night students at the university or college are much older than day students. Introduce
an explicit control for day versus night students in the preceding experiment.
The randomized block design could be incorporated into this design so that students are blocked
by whether they are night or day students.
7. Why are quasi-experiments much more popular in marketing research than true
experiments?
Quasi-experimental designs generally are more feasible in field settings than are true
experiments. The researcher is not expected to have control over the scheduling of treatments
and the randomization of respondents. This type of research is more practical in field
applications. It is also less expensive. Often, the results of quasi-experiments are “good enough”
to make a marketing management decision.
8. How does history differ from maturation? What specific actions might you take to deal
with each in an experiment?
History considers special events or variables outside the experiment that may take place between
the beginning and the end of the experiment and affect the value of the dependent variable.
Maturation refers to changes in subjects within the experiment that are a function of time which
may also affect the reported values of the dependent variables.
9. The manufacturer of microwave ovens has designed an improved model that will reduce
energy costs and cook food evenly throughout. However, this new model will increase the
product’s price by 30 percent because of extra components and engineering design
changes. The company wants to determine what effect the new model will have on sales of
its microwave ovens. Propose an appropriate experimental design that can provide the
information for management. Why did you select this design?
A two-factor factorial design—or a number of other designs—might be used. The two factor
factorial design might be used with two price levels (current price and 30-percent increased
price) and two packages of features (current features and new features). In the experiment,
randomly selected subjects would be randomly assigned to the four different treatments. Subjects
exposed to each treatment would be asked to indicate their likelihood of purchasing the feature-
price combination to which they are exposed. Likelihood of purchase is the dependent variable.
Results could be analyzed to determine the effects of the different treatments. This is an
appropriate design because it allows separate consideration of the two independent variables, in
this case price and product features.
10. Discuss various methods by which extraneous causal factors can be controlled.
Extraneous causal factors can be controlled by randomization of testing units, multiple measures
of the dependent variable, ensuring that there is at least one control group and one experimental
group and that they are matched on similar demographic dimensions, random selection of sample
from the population of interest, subjects’ being fresh at the start of the experiment, and the
treatment variable and the before and after measures’ being administered properly and
consistently.
11. Discuss the alternatives to traditional test marketing. Explain their advantages and
disadvantages.
Simulated Test Markets (STMs) are an alternative to traditional test marketing. The advantages
include a low probability of your competitors knowing about your testing, the speed at which
tests can be performed, relatively low expense, and accuracy of the models. Another alternative
is a “rolling rollout” where a product is launched in a certain region rather than in one or two
cities. Progress of the product, its advertisement, and promotion can be tracked with scanner
data. The advantages and disadvantages of this method are similar to those of traditional test
marketing. A firm could choose to try a product in a foreign market before rolling it out globally.
One disadvantage in this method is understanding cultural differences that must be taken into
consideration before a product is launched in a given country.
Data from the website indicates that these cities consistently mirror the demographic profile of
the United States with respect to variables such as age, marital status, home ownership, and
estimated income.
REAL-LIFE RESEARCH
Case 8.1 Texas Red Soft Drinks (p. 205)
Key Points:
• Texas Red is the oldest soft-drink company in Texas. During the 1980s, the company
went through bankruptcy because of its inability to compete with the big national soft
drink brands. In 2003, a group of investors purchased the brand name from the
bankruptcy court and reincarnated it with distribution primarily through specialty grocery
stores and selected theme restaurants. The company is currently available in 267 grocery
stores and 123 restaurants across Texas.
• The “new” Texas Red has experienced solid growth and financial performance over its
almost eight-year history. However, the competitive environment remains tough with the
big national brands at one end of the spectrum and other specialty soft-drink producers at
the other end. It is critical that Texas Red spend its limited marketing budget in the most
efficient manner to drive business to its retail and restaurant locations.
• In recent months, the management team at Texas Red has been divided in regard to the
best marketing strategy for the company. One contingent wants to pursue a strategy based
on a low price relative to other specialty soft drinks. The other group wants to focus on
enhancing awareness and image of the brand with a focus on its long history in the state
of Texas and the unique aspects and high quality of its products. The difference of
opinion between the two factions has become heated and somewhat divisive.
Furthermore, time is running out to get their marketing strategy in place for the coming
year.
Questions
1. Is the test market approach the best way to tackle this problem, all things considered?
Are there other viable options and, if so, what are the options?
The researcher can conduct a survey of customers and use discrete choice analysis to analyze the
data.
2. Which of the experimental designs discussed in the chapter would be most feasible for
this project? Why that design?
The researcher should use a factorial experimental design.
3. How many markets should be used for the test? What should be the characteristics of
these markets?
4. What sort of evidence, from the test, would definitively break the deadlock between the
two groups with different visions as the company?