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Business Research Methods

Business Research Methods 21
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May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.Licensed to: The Role of Business Research LEARNING OUTCOMES After studying this chapter, you should be able to 1. Understand how research contributes to business success CHAPTER 2. Know how to define business research 3. Understand the difference between basic and applied business research 4. Understand how research activities can be used to address business decisions 5. Know when business research should and should not be conducted 6. Appreciate the way that technology and internationalization are 1 changing business research Chapter Vignette: ESPN Hits a Home Run by Leveraging the Power of its Business Research o many people, the abbreviation ESPN says it all The answer was a resounding “Yes” ESPN partnered when you are thinking about sports program with Quaero, a business research company that specializes in ming. The Entertainment and Sports Program customer intelligence, to integrate their numerous databases T ming Network was launched in 1979, with its and begin to learn more about how fans use their media, famous SportsCenter broadcast followed by a presentation of a and what specifically they were looking for. They learned that slow pitch softball game. Over time, ESPN has become a media enhancing the fan’s experience, regardless of the media, had juggernaut, expanding its sports content and programming bottomline implications for their own revenue, and the revenue globally, and is a media presence in every possible outlet, includ of their advertisers. ESPN realized that based upon their cus ing television, video, and the Internet. In fact, ESPN.com has tomer research, crossnetwork promotions and individualized long been one of the most visited sites on the World Wide Web. It is the passionate sports fan that makes ESPN’s success pos sible. Over the years, information about the people who watch and interact with ESPN content had been slowly accumulating across their different media outlets. This information included not just web clicks and television viewership, but also purchases from ESPN and its affiliated advertising partners. Since this information was located in separate databases and across dif ferent operating units, it had become difficult to know just who the fan was, and what they were truly interested in. What could be done with this considerable business information Could ESPN become more knowledgeable (and more profitable) by learning more about the sports fans who use their content 2 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Matthew Jacques/ShutterstockLicensed to: CHAPTER 1 The Role of Business Research 3 • advertising content could be built for their sports fans, and that It was business research that made this possible. Gaining seeing the sports fan as a core asset of the company was criti intelligence on a critical business function, a function that had cal to success. In fact, the activities associated with the business global implications, helped create a profitable solution for ESPN. research they conducted on their customers were not viewed The value of this research for ESPN and its millions of sports as a cost, but in fact served as a revenue driver to their firm’s fans created a “winwin” for all. ESPN had, in fact, hit a “home 1 profitability. run” through the use of business research. Introduction The recent history of ESPN demonstrates the need for information in making informed decisions addressing key issues faced by all competitive businesses. Research can provide that information. Without it, business decisions involving both tactics and strategies are made in the dark. We open with two examples illustrating how business decisions require intelligence and how research can provide that intelligence. The following examples focus specifically on how research can lead to innovation in the form of new products, improvements in existing goods and services, or enhancements in employee relationships. Imagine yourself in the role of business manager as you read these examples and think about the information needs you may have in trying to build success for your company. The coffee industry, after years of the “daily grind,” has proved quite dynamic over the past decade. After years of steady decline, research on consumers’ beverage purchases show that coffee sales began rebounding around 1995. Telephone interviews with American consumers estimated that there were 80 million occasional coffee drinkers and 7 million daily upscale coffee drinkers in 1995. By 2001, estimates suggested there were 161 million daily or occasional U.S. coffee drinkers 2 and 27 million daily upscale coffee drinkers. Coffee drinking habits have also changed. In 1991 there were fewer than 450 coffeehouses in the United States. Today, it seems like places such as Starbucks, Second Cup, The Coffee Bean Tea Leaf, and Gloria Jean’s are virtually everywhere in the United States and Canada. There are more than 17,000 Starbucks locations around the world with the majority of these being wholly owned 3 stores. While locating these outlets requires significant formal research, Starbucks also is researching new concepts aimed at other ways a coffee shop can provide value to consumers. One concept that has survived testing thus far is the addition of free, instore highspeed wireless Internet access. Thus, you can have hot coffee in a hotspot After Starbucks baristas began reporting that customers were asking clerks what music was playing in the stores, Starbucks began testing the sales of CDs contain ing their instore music. In 2009, Starbucks began a bundled pricing promotion offering a breakfast sandwich or pastry and a tall coffee drink for 3.95 in response to the declining economy. The research that underlies the introduction of these valueadded concepts could first include simply ask ing a consumer or a small group of consumers for their reaction to the concept. Survey research and then actual instore tests may follow. So, the research underlying such decisions can be multilayered. Often, business research is directed toward an element of an organization’s internal operations. For example, DuPont utilizes research techniques to better understand their employees’ needs. 4 DuPont has 94,000 employees worldwide and 54,000 in the United States. The company has conducted four comprehensive work/life needs assessment surveys of its employees since 1985. This business research provides the company with considerable insight into employee work/life behavior and allows DuPont to identify trends regarding employee needs. The most recent survey found that, as the company’s work force is aging, employees’ child care needs are diminishing, but elder care needs are emerging. The survey found that 88 percent of respondents identified themselves as baby boomers. About 50 percent of the employees say that they have—or expect to have—elder care responsibilities in the next three to four years, up from 40 percent in 1995. The surveys have shown that DuPont employees want to balance work and family responsibili ties, feeling deeply committed to both aspects of their lives. The latest research shows that company efforts to satisfy these desires have been successful. Employee perception of support from manage ment for work/life issues improved from the 1995 study and the results indicate employees feel Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.Licensed to: SURVEY THIS As a user of this book, you can take part in a real business research survey. In each chapter, we’ll refer back to some aspect of this survey to illustrate key points about busi ness research. For instance, we can easily illustrate different types of survey approaches by referring back to some question contained in the survey. In later chapters, your instructor will provide you with a way to access not only the data from your particular class, but also data from all users. This data can be used to illustrate some of the analytical approaches discussed in the closing chapters of the book. For now, your instructor will provide you with instructions to access the questionnaire via the Internet. As a first step in this process, simply respond to the items in the questionnaire just as you would to any other research survey. less stress. Support from colleagues is rated high, and women indicated they now have more role models. The study also reported that the feeling of management support is directly connected to employees’ efforts to make the company successful. Employees who use the work/life programs are willing to “go the extra mile.” These examples illustrate the need for information in making informed business decisions. The statistics about coffee demonstrate how research can track trends that may lead to new busi ness opportunities. Starbucks’s research also illustrates how research can be used to examine new concepts in progressively more complex stages, setting the stage for a more successful product introduction. DuPont’s ability to track employee attitudes allows them to adjust employee benefit packages to maximize satisfaction and reduce employee turnover. These are only the tip of the iceberg when it comes to the types of business research that are conducted every day. This chapter introduces basic concepts of business research and describes how research can play a crucial role in creating and managing a successful business. The Nature of Business Research Business research covers a wide range of phenomena. For managers, the purpose of research is to provide knowledge regarding the organization, the market, the economy, or another area of uncertainty. A financial manager may ask, “Will the environment for longterm financing be bet ter two years from now” A personnel manager may ask, “What kind of training is necessary for production employees” or “What is the reason for the company’s high employee turnover” A marketing manager may ask, “How can I monitor my retail sales and retail trade activities” Each of these questions requires information about how the environment, employees, customers, or the economy will respond to executives’ decisions. Research is one of the principal tools for answering these practical questions. Within an organization, a business researcher may be referred to as a marketing researcher, an organizational researcher, a director of financial and economic research, or one of many other titles. Although business researchers are often specialized, the term business research encompasses all of these functional specialties. While researchers in different functional areas may investigate different phenomena, they are similar to one another because they share similar research methods. 5 It’s been said that “every business issue ultimately boils down to an information problem.” Can the right information be delivered The ultimate goal of research is to supply accurate information that reduces the uncertainty in managerial decision making. Very often, decisions are made with 4 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Courtesy of Qualtrics.comLicensed to: CHAPTER 1 The Role of Business Research 5 • little information for various reasons, including cost considerations, insufficient time to  conduct research, or management’s belief that enough is already known. Relying on seatofthepants decision making—decision making without research—is like betting on a long shot at the race track because the horse’s name is appealing. Occasionally there are successes, but in the long run, intuition without research leads to losses. Business research helps decision makers shift from intui tive information gathering to systematic and objective investigation. Business Research Defined Business research is the application of the scientific method in searching for the truth about busi business research ness phenomena. These activities include defining business opportunities and problems, generating The application of the scientific method in searching for and evaluating alternative courses of action, and monitoring employee and organizational perfor 6 the truth about business mance. Business research is more than conducting surveys. This process includes idea and theory phenomena. These activities development, problem definition, searching for and collecting information, analyzing data, and include defining business communicating the findings and their implications. opportunities and problems, This definition suggests that business research information is not intuitive or haphazardly gath generating and evaluating ideas, monitoring performance, ered. Literally, research (research) means “to search again.” The term connotes patient study and sci and understanding the entific investigation wherein the researcher takes another, more careful look at the data to discover business process. all that is known about the subject. Ultimately, all findings are tied back to the underlying theory. The definition also emphasizes, through reference to the scientific method, that any infor mation generated should be accurate and objective. The nineteenthcentury American humorist Artemus Ward claimed, “It ain’t the things we don’t know that gets us in trouble. It’s the things we know that ain’t so.” In other words, research isn’t performed to support preconceived ideas but to test them. The researcher must be personally detached and free of bias in attempting to find truth. If bias enters into the research process, the value of the research is considerably reduced. We will discuss this further Chapter 12. Our definition makes it clear that business research is designed to facilitate the managerial decisionmaking process for all aspects of the business: finance, marketing, human resources, and so on. Business research is an essential tool for management in virtually all problemsolving and decisionmaking activities. By providing the necessary information on which to base business decisions, research can decrease the risk of making a wrong decision in each area. However, it is important to note that research is an aid to managerial decision making, never a substitute for it. Finally, this definition of business research is limited by one’s definition of business. Certainly, research regarding production, finance, marketing, and management in forprofit corporations like DuPont is business research. However, business research also includes efforts that assist non profit organizations such as the American Heart Association, the San Diego Zoo, the Boston Pops Orchestra, or a parochial school. Further, governmental agencies such as the Federal Emergency Management Agency (FEMA) and the Department of Homeland Security (DHS) perform many functions that are similar, if not identical, to those of forprofit business organizations. For instance, the Food and Drug Administration (FDA) is an important user of research, employing it to address the way people view and use various food and drugs. One such study commissioned and funded research to address the question of how consumers used the risk summaries that are included with 7 all drugs sold in the United States. Therefore, notforprofits and governmental agencies can use applied business research research in much the same way as managers at Starbucks or DuPont. While the focus is on for Research conducted to address profit organizations, this book explores business research as it applies to all institutions. a specific business decision for a specific firm or organization. Applied and Basic Business Research basic business research Research conducted without One useful way to describe research is based on the specificity of its purpose. Applied business a specific decision in mind research is conducted to address a specific business decision for a specific firm or organization. The that usually does not address the needs of a specific opening vignette describes a situation in which ESPN used applied research to decide how to best organization. It attempts to create knowledge of its sports fans and their preferences. expand the limits of knowledge Basic business research (sometimes referred to as pure research) is conducted without a specific in general and is not aimed at decision in mind, and it usually does not address the needs of a specific organization. It attempts to solving a particular pragmatic expand the limits of knowledge in general, and as such it is not aimed at solving a particular pragmatic problem. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.Licensed to: 6 PART ONE Introduction • problem. Basic research can be used to test the validity of a general business theory (one that applies to all businesses) or to learn more about a particular business phenomenon. For instance, a great deal of basic research addresses employee motivation. How can managers best encourage workers to dedicate themselves toward the organization’s goals From such research, we can learn the factors that are most important to workers and how to create an environment where employees are most highly motivated. This basic research does not examine the problem from any single organization’s perspec tive. However, Starbucks’ or DuPont’s management may become aware of such research and use it to design applied research studies examining questions about their own employees. Thus, the two types of research are not completely independent, as basic research often provides the foundation for later applied research. While the distinction between basic and applied is useful in describing research, there are very few aspects of research that apply only to basic or only to applied research. We will use the term business research more generally to refer to either type of research. The focus of this text is more on applied research—studies that are undertaken to answer questions about specific problems or to make decisions about particular courses of action or policies. Applied research is emphasized in this text because most students will be oriented toward the daytoday practice of management, and most students and researchers will be exposed to shortterm, problemsolving research conducted for businesses or nonprofit organizations. The Scientific Method the scientific method All research, whether basic or applied, involves the scientific method. The scientific method is the way researchers go about using knowledge and evidence to reach objective conclusions The way researchers go about using knowledge and evidence about the real world. The scientific method is the same in social sciences, such as business, as to reach objective conclusions in physical sciences, such as physics. In this case, it is the way we come to understand business about the real world. phenomena. Exhibit 1.1 briefly illustrates the scientific method. In the scientific method, there are mul tiple routes to developing ideas. When the ideas can be stated in researchable terms, we reach the hypothesis stage. The next step involves testing the hypothesis against empirical evidence (facts from observation or experimentation). The results either support a hypothesis or do not support a hypothesis. From these results, new knowledge is generated. EXHIBIT 1.1 A Summary of the Scientific Method Prior Observation Knowledge Hypotheses Hypothesis Test (Observation or Experimentation) Conclusion (New Knowledge) Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Cengage Learning 2013Licensed to: CHAPTER 1 The Role of Business Research 7 • In basic research, testing these prior conceptions or hypotheses and then making inferences and conclusions about the phenomena leads to the establishment of general laws about the phe nomena. Use of the scientific method in applied research ensures objectivity in gathering facts and testing creative ideas for alternative business strategies. The essence of research, whether basic or applied, lies in the scientific method. Much of this book deals with scientific methodology. Thus, the techniques of basic and applied research differ largely in degree rather than in substance. Managerial Value of Business Research In all of business strategy, there are only a few business orientations (see Exhibit 1.2). A firm can be productoriented. A productoriented firm prioritizes decision making in a way that emphasizes productoriented technical superiority in the product. Thus, research that gathers information from technicians and Describes a firm that prioritizes decision making in a way experts in the field is very important in making critical decisions. A firm can be productionoriented. that emphasizes technical A productionoriented firm prioritizes the efficiency and effectiveness of production processes in superiority in the product. making decisions. Here, research providing input from workers, engineers, finance, and accounting becomes important as the firm seeks to drive costs down. Productionoriented firms are usually productionoriented very large firms manufacturing products in very large quantities. The third orientation is marketing Describes a firm that prioritizes oriented, which focuses more on how the firm provides value to customers than on the physical prod efficiency and effectiveness of the production processes in uct or production process. With a marketingoriented organization the majority of research focuses making decisions. on the customer. Research addressing consumer desires, beliefs, and attitudes becomes essential. We have argued that research facilitates effective management. For example, Yoplait GoGurt marketingoriented illustrates the benefit of business research. The company’s consumer research about eating regular Describes a firm in which all yogurt at school showed that moms and kids in their “tweens” wanted convenience and portabil decisions are made with a ity. Some brands, like Colombo Spoon in a Snap, offered the convenience of having a utensil as conscious awareness of their effect on the customer. part of the packaging/delivery system. However, from what Yoplait learned about consumers, they thought kids would eat more yogurt if they could “lose the spoon” and eat yogurt anywhere, any time. Moms and kids participating in a taste test were invited to sample different types of onthego packaging shapes—long tubes, thin tubes, fat tubes, and other shapes—without being told how to handle the packaging. One of the company’s researchers said, “It was funny to see the moms fidget around, then daintily pour the product onto a spoon, then into their mouths. The kids instantly EXHIBIT 1.2 Business Orientations ProductOriented Firm Example Prioritizes decision making that emphasizes The fashion industry makes clothes in styles physical product design, trendiness, or and sizes that few can adopt. technical superiority Research focuses on technicians and experts in the field. ProductionOriented Firm Example Prioritizes efficiency and effectiveness of The U.S. auto industry’s assemblyline process production processes in making decisions is intent on reducing costs of production as low as possible. Research focuses on line employees, engineers, accountants, and other efficiency experts. MarketingOriented Firm Example Focuses on how the firm provides value to Wellknown hotel chains are designed to customers address the needs of travelers, particularly business travelers. Research focuses on customers. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Cengage Learning 2013Licensed to: 8 PART ONE Introduction • 8 jumped on it. They knew what to do.” Squeezing GoGurt from the tube was a big plus. The kids loved the fact that the packaging gave them permission to play with their food, something parents always tell them not to do. Based on their research, Yoplait introduced GoGurt in a threesided tube designed to fit in kids’ lunchboxes. The results were spectacular, with more than 100 million in sales its first year on the market. Yoplait realized that knowledge of consumers’ needs, coupled with product research and development, leads to successful business strategies. As the Yoplait example shows, the prime managerial value of business research is that it pro vides information that improves the decisionmaking process. The decisionmaking process asso ciated with the development and implementation of a business strategy involves four interrelated stages: 1. Identifying problems or opportunities 2. Diagnosing and assessing problems or opportunities 3. Selecting and implementing a course of action 4. Evaluating the course of action Business research, by supplying managers with pertinent information, may play an important role by reducing managerial uncertainty in each of these stages. Identifying Problems or Opportunities Before any strategy can be developed, an organization must determine where it wants to go and how it will get there. Business research can help managers plan strategies by determining the nature of situations or by identifying the existence of problems or opportunities present in the organiza tion. Business research may be used as a scanning activity to provide information about what is occurring within an organization or in its environment. The mere description of some social or economic activity may familiarize managers with organizational and environmental occurrences and help them understand a situation. Consider these two examples: ■ The description of the dividend history of stocks in an industry may point to an attrac tive investment opportunity. Information supplied by business research may also indicate problems. ■ Employee interviews undertaken to characterize the dimensions of an airline reservation clerk’s job may reveal that reservation clerks emphasize competence in issuing tickets over courtesy and friendliness in customer contact. Once business research indicates a problem or opportunity, managers may feel that the alterna tives are clear enough to make a decision based on their experience or intuition. However, often they decide that more business research is needed to generate additional information for a better understanding of the situation. Diagnosing and Assessing Problems or Opportunities After an organization recognizes a problem or identifies a potential opportunity, business research can help clarify the situation. Managers need to gain insight about the underlying factors causing the situation. If there is a problem, they need to specify what happened and why. If an opportunity exists, they may need to explore, refine, and quantify the opportunity. If multiple opportunities exist, research may be conducted to set priorities. Selecting and Implementing a Course of Action After the alternative courses of action have been clearly identified, business research is often con ducted to obtain specific information that will aid in evaluating the alternatives and in selecting the best course of action. For example, suppose HarleyDavidson is considering establishing a dealer network in either China or India. In this case, business research can be designed to gather Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.Licensed to: CHAPTER 1 The Role of Business Research 9 • the relevant information necessary to determine which, if either, course of action is best for the organization. Opportunities may be evaluated through the use of various performance criteria. For example, estimates of market potential allow managers to evaluate the revenue that will be generated by each of the possible opportunities. A good forecast supplied by business researchers is among the most useful pieces of planning information a manager can have. Of course, complete accuracy in fore casting the future is not possible, because change is constantly occurring in the business environ ment. Nevertheless, objective information generated by business research to forecast environmental occurrences may be the foundation for selecting a particular course of action. Even the best plan is likely to fail if it is not properly implemented. Business research may be conducted to indicate the specific tactics required to implement a course of action. evaluation research Evaluating the Course of Action The formal, objective measurement and appraisal After a course of action has been implemented, business research may serve as a tool to tell manag of the extent a given activity, ers whether or not planned activities were properly executed and if they accomplished what they project, or program has achieved its objectives or were expected to accomplish. In other words, managers may use evaluation research to provide whether continuing programs feedback for evaluation and control of strategies and tactics. are presently performing as Evaluation research is the formal, objective measurement and appraisal of the extent to which projected. a given activity, project, or program has achieved its objectives or whether continuing programs are presently performing as projected. Evaluation research may also provide information about the performancemonitoring research major factors influencing the observed performance levels. Refers to research that In addition to business organizations, nonprofit organizations and governmental agencies regularly, sometimes frequently conduct evaluation research. Every year thousands of federal evaluation studies are routinely, provides feedback undertaken to systematically assess the effects of public programs. For example, the U.S. General for evaluation and control of Accounting Office has been responsible for measuring outcomes of the Employment Opportunity business activity. Act, the Job Corps program, and Occupational and Safety and Health Administration (OSHA) programs. Performancemonitoring research is a specific type of evaluation research that regularly, per haps routinely, provides feedback for the evaluation and control of recurring business activity. For Fun in the snow depends on example, most firms continuously monitor wholesale and retail activity to ensure early detection of weather trends, economic sales declines and other anomalies. In the grocery and retail drug industries, sales research may use outlook, equipment, and the Universal Product Code (UPC) for packages, together with computerized cash registers and clothing—all subjects for a electronic scanners at checkout counters, to provide valuable marketshare information to store business researcher. and brand managers interested in the retail sales volume of specific products. United Airlines’ Omnibus inflight survey provides a good example of performance monitoring research for quality management. United routinely selects sample flights and administers a questionnaire about inflight service, food, and other aspects of air travel. The Omni bus survey is conducted quarterly to deter mine who is flying and for what reasons. It enables United to track demographic changes and to monitor customer ratings of its services on a continuing basis, allow ing the airline to gather vast amounts of information at low cost. The information relating to customer reaction to services can be compared over time. For example, suppose United decided to change its menu for inflight meals. The results of the Omnibus survey might indicate that, Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Agefotostock/SuperStockLicensed to: RESEARCH SNa PSHOt HarleyDavidson Goes Abroad Before HarleyDavidson goes overseas, it must perform considerable research on that market. It may find that consumers in some countries, such as France or Italy, have a strong preference for more economical and practical motorbikes. There, people may prefer a Vespa Wasp to a to budge on tariffs although they were willing to give on Harley Hog Other times, they may find that consumers emission standards. Instead, Harley may direct its effort more have a favorable attitude toward HarleyDavidson and that toward the U.S. women’s market for bikes. Research shows it could even be a product viewed as very prestigious. Harley that motorcycle ownership among U.S. women has nearly recently considered doing business in India based on trend doubled since 1990 to approximately 10 percent. Product analysis showing a booming economy. Favorable consumer research suggests that Harley may need to design smaller opinion and a booming economy were insufficient to justify and sportier bikes to satisfy this market’s desires. Perhaps distributing Harleys in India. The problem Luxury imports these new products would also be easier to market in India. would be subject to very high duties that would make them Research will tell. costprohibitive to nearly all Indian consumers and India has Sources: “Harley Davidson Rules Out India Foray for Near Future,” strict emission rules for motorbikes. Thus, although research AsiaAfrica Intelligence Wire (September 2, 2005); “Women Kick It into on the market was largely positive, Harley’s research on the Gear,” Akron Beacon Journal (May 22, 2005); “No Duty Cut on Harley Davidson Bikes, India to US,” The Financial Express (February 24, 2008), political operating environment eventually determined its www.financialexpress.com/news/NodutycutonHarleyDavidsonbikes decision. Even after considerable negotiation, India refused IndiatoUS/276635, accessed August 2, 2011. shortly after the menu changed, the customers’ rating of the airline’s food declined. Such informa The secret of tion about product quality is extremely valuable, as it allows management to quickly spot trends ‘‘ success is to know among passengers in many aspects of air travel, such as airport lounges, gateline waits, or cabin something nobody cleanliness. Then managers can rapidly take action to remedy such problems. else knows. ’’ —ARISTOTLE ONASSIS When Is Business Research Needed The need to make intelligent, informed decisions ultimately motivates an organization to engage in business research. Not every decision requires research. Thus, when confronting a key decision, a manager must initially decide whether or not to conduct business research. The determination of the need for research centers on (1) time constraints, (2) the availability of data, (3) the nature of the decision to be made, and (4) the value of the research information in relation to costs. Time Constraints Systematic research takes time. In many instances, management believes that a decision must be made immediately, allowing no time for research. Decisions sometimes are made without adequate information or thorough understanding of the business situation. Although making decisions without researching a situation is not ideal, sometimes the urgency of a situation precludes the use of research. The urgency with which managers usually want to make decisions conflicts with researchers’ desire for rigor in following the scientific method. Availability of Data Often managers already possess enough data, or information, to make sound decisions without additional research. When they lack adequate information, however, research must be considered. This means that data need to be collected from an appropriate source. If a potential source of data exists, managers will want to know how much it will cost to get the data. 10 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Michael Newman/PhotoEditLicensed to: RESEARCH SNa PSHOt Business Class Success If you’ve ever checked the price of businessclass airfare on a flight overseas, you were probably surprised at the price. A discounted roundtrip coach ticket from Atlanta to Paris in peak season often costs just over one thousand dollars. That same businessclass ticket would often cost between five and coach seats The result is a businessclassonly airline with cross ten thousanddollars Typically, these flights take place in Atlantic fares ranging between 1,600 and 3,800, less than larger passenger aircraft such as a Boeing 747 or a Boeing 777. half of traditional businessclass fares. Taking the concept to an A Boeing 777 can seat up to 450 passengers. However, by even smaller scale, Eos configured Boeing 757s into 48seat all including three dozen businessclass seats, the capacity drops to businessclass planes. under 400 passengers. Both Maxjet and Eos received positive reviews, along with Thus, it is easy to see that a great deal of research must some criticisms. For example, Maxjet did not provide power assess both the product design (what service and product attri outlets for laptops at their seats, considered by some to be butes make up a businessclass experience) and pricing (in both a “fatal flaw” as far as businessclass service is considered. coach and business class) to determine the best configuration Despite the apparent appeal, both Maxjet (December 2007) of the aircraft. Research shows that businessclass travelers pri and Eos (April 2008) declared bankruptcy. oritize the comfort of the seat and the ability to be able to lie Could more effective business research have determined flat during the flight, the quality of food, and the convenience of these were not feasible business ventures Or, could Maxjet’s boarding as attributes that make up the businessclass experience. “fatal flaw” of a lack of power outlets been identified Sound In the past few years, a few startup airlines have been business research may have enhanced the chance of success of trying to capitalize on this concept by starting “discount” these airlines. businessclassonly airlines. Maxjet estimated that consumers Sources: McCarnety, Scott, “StartUp Airlines Fly Only Business Class,” will exchange a little comfort for a reduction in price. They con The Wall Street Journal (September 20, 2005), D1; Pitock, Todd, “Getting There,” Forbes 176 (September 2005), 30–32; Robertson, David, figured Boeing 737s (smaller than typical transocean carriers) “Eos Bankruptcy Filing Signals End to Cheap Executive Travel,” The Times with 102 businessclass seats that will not quite lie flat—and no (April 28, 2008). If the data cannot be obtained, or it cannot be obtained in a timely fashion, this particular research project should not be conducted. For example, many African nations have never con ducted a population census. Organizations engaged in international business often find that data about business activity or population characteristics that are readily available in the United States are nonexistent or sparse in developing countries. Imagine the problems facing researchers who wish to investigate market potential in places like Uzbekistan, Macedonia, or Rwanda. Nature of the Decision The value of business research will depend on the nature of the managerial decision to be made. A routine tactical decision that does not require a substantial investment may not seem to warrant a substantial expenditure for research. For example, a computer company must update its operator’s instruction manual when it makes minor product modifications. The research cost of determining the proper wording to use in the updated manual is likely to be too high for such a minor deci sion. The nature of the decision is not totally independent of the next issue to be considered: the benefits versus the costs of the research. In general, however, the more strategically or tactically important the decision, the more likely it is that research will be conducted. Benefits versus Costs Earlier we discussed some of the managerial benefits of business research. Of course, conduct ing research to obtain these benefits requires an expenditure of money. In any decisionmaking situation, managers must identify alternative courses of action and then weigh the value of each 11 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Lars Lindblad/ShutterstockLicensed to: 12 PART ONE Introduction • alternative against its cost. Business research can be thought of as an investment alternative. When deciding whether to make a decision without research or to postpone the decision in order to conduct research, managers should ask three questions: 1. Will the payoff or rate of return be worth the investment 2. Will the information gained by business research improve the quality of the managerial deci sion enough to warrant the expenditure 3. Is the proposed research expenditure the best use of the available funds For example, TVCable Week was not testmarketed before its launch. Although the magazine had articles and stories about television personalities and events, its main feature was program listings, channel by channel, showing the exact programs a particular subscriber could receive. To produce a custom magazine for each individual cable television system in the country required developing a costly computer system. Because that development necessitated a substantial expen diture, one that could not be scaled down by research, conducting research was judged to be an unwise investment. The value of the potential research information was not positive because its cost exceeded its benefits. Unfortunately, pricing and distribution problems became so compelling after the magazine was launched that the product was a failure. Nevertheless, without the luxury of hindsight, managers made a reasonable decision not to conduct research. They analyzed the cost of the information relative to the potential benefits of the information. Exhibit 1.3 outlines the criteria for determining when to conduct business research. EXHIBIT 1.3 Determining When to Conduct Business Research Time Availability Nature of the Benefits versus Constraints of Data Decision Costs Is sufficient time Is it feasible Is the decision Does the value of the Conduct available before to obtain the of considerable research information Business a decision will Yes data Yes strategic or tactical Yes exceed the cost of Yes Research be made → → importance → conducting research → No ↓ No ↓ No ↓ No ↓ Do Not Conduct Business Research Business Research in the TwentyFirst Century Business research, like all business activity, continues to change. Changes in communication tech nologies and the trend toward an ever more global marketplace have played a large role in many of these changes. Communication Technologies Virtually everyone is “connected” today. Increasingly, many people are “connected” nearly all the time. Within the lifetime of the typical undergraduate college senior, the way information is exchanged, stored, and gathered has been revolutionized completely. Today, the amount of information formally contained in an entire library can rest easily in a single personal computer. The speed with which information can be exchanged has also increased tremendously. During the 1970s, exchanging information overnight through a courier service from anywhere in Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Cengage Learning 2013Licensed to: RESEARCH SNa PSHOt “Jacques” Daniels Sales of U.S. distilled spirits have declined over the last 10 to 15 years as more Americans turn to wine or beer as their beverage of choice. As a result, companies like Bacardi and BrownForman, producers of Jack Daniels, have pursued busi ness development strategies involving increased efforts to expand into international markets. The BrownForman budget 3. British distilled spirit consumers also like mixed drinks, but for international ventures includes a significant allocation for they usually partake in bars and restaurants. research. By doing research before launching the product, 4. In China and India, consumers more often choose coun BrownForman can learn product usage patterns within a par terfeit or “knockoffs” to save money. Thus, innovative ticular culture. Some of the findings from this research indicate: research approaches have addressed questions related to the way the black market works and how they can better 1. Japanese consumers use Jack Daniels (JD) as a dinner bever educate consumers about the differences between the real age. A party of four or five consumers in a restaurant will thing and the knockoffs. order and drink a bottle of JD with their meal. The result is that Jack Daniels is now sold extensively, in various 2. Australian consumers mostly consume distilled spirits forms, and with different promotional campaigns, outside of in their homes. Also in contrast to Japanese consumers, the United States. Australians prefer to mix JD with soft drinks or other mixers. As a result of this research, JD launched a mix Sources: Swibel, Mathew, “How Distiller BrownForman Gets Rich by ture called “Jack and Cola” sold in 12ounce bottles all Exploiting the Greenback’s Fall—and Pushing Its Brands Abroad,” around Australia. The product has been very successful. Forbes 175, no. 8 (2005), 152–155. the continental United States was heralded as a near miracle of modern technology. Today, we can exchange information from nearly anywhere in the world to nearly anywhere in the world almost instantly. Internet connections are now wireless, so one doesn’t have to be tethered to a wall to access the World Wide Web. Our mobile phones and handheld data devices can be used not only to converse, but also as a means of communication that can even involve business research data. In many cases, technology also has made it possible to store or collect data at a lower cost than in the past. Electronic communications are usually less costly than regular mail—and certainly less costly than a facetoface interview—and cost about the same amount no matter how far away a respondent is from a researcher. Thus, the expressions “time is collapsing” and “distance is disappearing” capture the tremendous revolution in the speed and reach of our communication technologies. Changes in computer technology have made for easier data collection and data analysis. As we discuss in Chapter 10, many consumer household panels now exist and can be accessed via the Internet. Thus, there is less need for the time and expense associated with regular mail survey approaches. Furthermore, the computing power necessary to solve complicated statistical prob lems is now easily accessible. Again, as recently as the 1970s, such computer applications required expensive mainframe computers found only in very large corporations, major universities, and large governmental/military institutions. Researchers could expect to wait hours or even longer to get results from a statistical program involving 200 respondents. Today, even the most basic laptop computers can solve complicated statistical problems involving thousands of data points in practi cally a nanosecond. Global Business Research Like all business activities, business research has become increasingly global as more and more firms operate with few, if any, geographic boundaries. Some companies have extensive international 13 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © Susan Van EttenLicensed to: 14 PART ONE Introduction • research operations. Upjohn conducts research in 160 different countries. ACNielsen International, known for its television ratings, is the world’s largest research company. Twothirds of its business 9 comes from outside the United States. Starbucks can now be found in nearly every developed country on the Earth. ESPN offers its programming on multiple continents. DuPont has a signifi cant presence in all regions of the world. Companies that conduct business in foreign countries must understand the nature of those particular markets and judge whether they require customized business strategies. For example, although the 15 nations of the European Union share a single formal market, research shows that Europeans do not share identical tastes for many consumer products. Business researchers have found no such thing as a “typical” European consumer; language, religion, climate, and centuries of tradition divide the nations of the European Union. Scantel Research, a British firm that advises companies on color preferences, found inexplicable differences in Europeans’ preferences in medi cines. The French prefer to pop purple pills, but the English and Dutch favor white ones. Consum ers in all three countries dislike bright red capsules, which are big sellers in the United States. This example illustrates that companies that do business in Europe must research throughout Europe to 10 adapt to local customs and buying habits. Even companies that produce brands that are icons in their own country are now doing research internationally. The Research Snapshot “ ‘Jacques’ Daniels” discusses how BrownForman, the parent company of Jack Daniels (the classic American “sour mash” or Bourbon whiskey), is 11 now interviewing consumers in the far corners of the world. The internationalization of research places greater demands on business researchers and heightens the need for research tools that allow crossvalidate us to crossvalidate research results, meaning that the empirical findings from one culture also exist and behave similarly in another culture. The development and application of these international To verify that the empirical 12 findings from one culture also research tools are an important topic in basic business research. exist and behave similarly in another culture. Overview The business research process is often presented as a linear, sequential process, with one specific step following another. In reality, this is not the case. For example, the time spent on each step varies, overlap between steps is common, some stages may be omitted, occasionally we need to backtrack, and the order sometimes changes. Nonetheless, some structure for the research process is necessary. The book is organized to provide this structure, both within each chapter and in the order of the chapters. Each chapter begins with a set of specific learning objectives. Each chapter then opens with a Chapter Vignette—a glimpse of a business research situation that provides a basis of reference for that chapter. Each chapter also contains multiple Research Snapshots—specific busi ness research scenarios that illustrate key points. Finally, each chapter concludes with a review of the learning objectives. The book is organized into seven parts. Part One is the Introduction, which includes this chapter and four others. This chapter provided an introduction to business research. The next three chapters of the book give students a fuller understanding of the business research environ ment. Part Two, Beginning Stages of the Research Process, provides the foundation for business research, discussing problem definition and qualitative and secondary research. The third section of the book, Research Designs for Collecting Primary Data, introduces survey research, discusses observation as a research technique, and provides an overview of experimental research. Mea surement Concepts, Part Four of the book, discusses the measurement of research constructs and questionnaire design. Part Five, Sampling and Fieldwork, describes the process involved in selecting a research sample and collecting data. Part Six, Data Analysis and Presentation, explains the various approaches to analyzing the data and describes methods of presentation. The book concludes with Part Seven, Comprehensive Cases with Computerized Databases, which will be integrated throughout the first six parts. Exhibit 1.4 provides an overview of the book and the research process. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.Licensed to: CHAPTER 1 The Role of Business Research 15 • EXHIBIT 1.4 An Overview of Business Research PART Sharing the Results Chapter 25 6 Analyzing the Data Chapters 19–24 Collecting the Data Chapter 18 5 Determining the Sample Chapters 16 17 Designing the Data Collection Instrument Chapter 15 4 Understanding Measurement of Research Constructs Chapters 13 14 Research Techniques: Observation and Experimentation 3 Chapters 8, 9, 10, 11, 12 Problem Definition, Secondary and Qualitative Research 2 Chapters 5, 6, 7 Understanding Business Research 1 Chapters 1, 2, 3, 4 SUMMARY There were six learning objectives in this chapter. After reading the chapter, the student should be competent in each area described by a learning objective. 1. Understand how research contributes to business success. While many business decisions are made “by the seat of the pants” or based on a manager’s intuition, this type of decision making carries with it a large amount of risk. By first researching an issue and gathering the appropriate information (from employees, customers, competitors, and the market) managers can make a more informed decision. The result is less risky decision making. Research is the intelligencegathering function in business. The intelligence includes infor mation about customers, competitors, economic trends, employees, and other factors that affect business success. This intelligence assists in decisions ranging from longrange planning to near term tactical decisions. 2. Know how to define business research. Business research is the application of the scientific method in searching for truth about business phenomena. The research must be conducted sys tematically, not haphazardly. It must be objective to avoid the distorting effects of personal bias. Business research should be rigorous, but the rigor is always traded off against the resource and time constraints that go with a particular business decision. 3. Understand the difference between basic and applied business research. Applied business research seeks to facilitate managerial decision making. It is directed toward a specific managerial decision in a particular organization. Basic or pure research seeks to increase knowledge of theories and concepts. Both are important, but applied research is more often the topic in this text. 4. Understand how research activities can be used to address business decisions. Businesses can make more accurate decisions about dealing with problems and/or the opportunities to pursue and how to best pursue them. The chapter provides examples of studies involving several dimen sions of managerial decision making. Thus, business research is useful both in a strategic and in a tactical sense. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Comprehensive Cases with Computerized Databases Survey This © Cengage Learning 2013Licensed to: 16 Part 1: Introduction 5. Know when business research should and should not be conducted. Managers determine whether research should be conducted based on (1) time constraints, (2) availability of data, (3) the nature of the decision to be made, and (4) the benefit of the research information versus its cost. 6. Appreciate the way that technology and internationalization are changing business research. Technology has changed almost every aspect of business research. Modern computer and communications technology makes data collection, study design, data analysis, data reporting, and practically all other aspects of research easier and better. Furthermore, as more companies do business outside their own borders, companies are conducting research globally. This places a greater emphasis on research that can assess the degree to which research tools can be applied and interpreted the same way in different cultures. Thus, research techniques often must cross validate results. KEY TERMS AND CONCEPTS applied business research, 5 evaluation research, 9 productionoriented, 7 basic business research, 5 marketingoriented, 7 the scientific method, 6 business research, 5 performancemonitoring research, 9 crossvalidate, 14 productoriented, 7 QUESTIONS FOR REVIEW AND CRITICAL THINKING 1. Is it possible to make sound managerial decisions without busi 7. Comment on the following statements: ness research What advantages does research offer to the deci a. Managers are paid to take chances with decisions. Research sion maker over seatofthepants decision making ers are paid to reduce the risk of making those decisions. 2. Define a marketing orientation and a product orientation. b. A business strategy can be no better than the information on Under which strategic orientation is there a greater need for which it is formulated. business research c. The purpose of research is to solve business problems. 3. Name some products that logically might have been developed 8. List the conditions that help a researcher decide when research with the help of business research. should or should not be conducted. 4. Define business research and describe its task. 9. How have technology and internationalization affected business 5. Which of the following organizations are likely to use business research research Why How 10. ‘NEt How do you believe the Internet has facilitated research Try a. Manufacturer of breakfast cereals to use the Internet to find the total annual sales for Starbucks b. Manufacturer of nuts, bolts, and other fasteners and for DuPont. c. The Federal Trade Commission 11. What types of tools does the researcher need to use more given d. A hospital the ever increasing internationalization of business e. A company that publishes business textbooks 6. An automobile manufacturer is conducting research in an attempt to predict the type of car design consumers will desire in the year 2020. Is this basic or applied research Explain. RESEARCH ACTIVITIES 1. ‘NEt Suppose you owned a jewelry store in Denton, Texas. 2. ‘NEt Find recent examples of news articles involving the use of You are considering opening a second store just like your business research in making decisions about different aspects of current store. You are undecided on whether to locate the new business. store in another location in Denton, Texas, or in Birmingham, 3. ‘NEt Find an article illustrating an example of an applied Alabama. Why would you decide to have some research done research study involving some aspect of technology. How does before making the decision Should the research be conducted it differ from a basic research study also focusing on a similar Go to http://www.census.gov. Do you think any of this aspect of technology information would be useful in the research Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.ENDNOTES 11 Honomichl, Jack, “Growth Chapter 1 Stunt,” Marketing News ( June 4, 1 Frankland, D., Vittal, S., Grant, M.,  2001), 144. Dickson, M. “Case Study: ESPN 12 “You Say Tomato, I Say Tomahto,” Drives Fan Value Through Customer Express Magazine (Spring 2006), 19. Intelligence”. Published March 1, 2011. Forrester Research Inc., Cambridge, MA. 2 “U.S. Coffee Makers Perky as Consumption Increases,” Nations Restaurant Business 36 (April 22, 2002), 34; “U.S. Specialty Coffee Market in 30 Year Renaissance,” (December 15, 2000), http://www .cnn.com. 3 www.starbucks.com. 4 Adapted from “DuPont Employee Survey Finds Eldercare Emerging as Key Work/Life Issues,” PR Newswire This page contains notes for this chapter only ( January 2, 2001), 49–93. 5 Garvin, Andrew P., “Evolve Approach to Serve Complex Market,” Marketing News (September 15, 2005), 22. 6 Gibson, Lawrence D., “Quo V adis Marketing Research” Marketing Research 12 (Spring 2000), 36–41. 7 Matthew, Arnold, “FDA Delays DTC Draft Guidance to Study How Consumers Use Brief Summaries,” Medical Marketing and Media 39 (November 2004), 10. 8 Reyes, Sonia, “Ian Friendly: Groove Tube,” BrandWeek (October 16, 2000), M111–M116. 9 Garretson, Judith and Scot Burton, “The Role of Spokescharacters as Advertisement and Package Cues in Integrated Marketing Communications,” Journal of Marketing 69 (October 2005), 118–132. 10 Clancy, Kevin J. and Randy L. Stone, “Don’t Blame the Metrics,” Harvard Business Review 83 ( June 2005), 26–28. 659 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.