CHAPTER Seven Learning Objectives Primary Data Collection Experimentation

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.

Learning Objectives 6. To compare types of experimental designs. 7. To gain insight into test marketing.

Learning Objectives What is an Experiment? To understand the nature of experiments. An Experiment: The researcher changes an explanatory, independent, or experimental variable to observe changes in the dependent variable. Experimental variable Dependent variable marketing mix total sales advertising market share

Learning Objectives Demonstrating Causation To understand the nature of experiments. Causal Research: The only types of research that has the potential to demonstrate that a change in one variable causes some predictable change in another variable To Demonstrate Causation: - Concomitant Variation (Correlation - Appropriate Time Order Of Occurrence - Elimination Of Other Possible Causal Factors

Learning Objectives Demonstrating Causation To understand the nature of experiments. Scientific Definition—Causation and Causality 1. X is only one of a number of determining conditions that caused the observed change in Y. 2. X can be a cause of Y if the presence of X makes the occurrence of Y more probable or likely 3. One can never definitively prove that X is a cause of Y but only infer that a relationship exists 4. Causal relationships are always inferred and never demonstrated conclusively beyond a shadow of a doubt.

Learning Objectives Demonstrating Causation To understand the nature of experiments. Concomitant Variation: A predictable statistical relationship between two variables Appropriate Time Order of Occurrence: A change in an independent variable must occur before a change in the dependent variable Elimination of Other Possible Causal Factors The change in B was not caused by some factor other than A

Learning Objectives The Experimental Setting: Laboratory or Field To learn about the experimental setting. Laboratory experiments: Conducted in a controlled setting. Advantages of laboratory experiments: • Ability to control all variables • Greater internal validity Disadvantages of laboratory experiments: • External validity Field experiments: Tests conducted outside the laboratory

Learning Objectives Experimental Validity To examine experimental validity. Internal and External Validity Internal Validity: The extent to which competing explanations can be ruled out. External Validity: The extent to which causal relationships can be generalized to outside persons, settings, and times. Experimental Notation: X indicates exposure O for observation O 1 X O 2 for time periods

Learning Objectives Experimental Validity To examine experimental validity. Extraneous Variables: Threats to Experimental Validity • History • Maturation • Instrument Variation • Selection Bias • Mortality • Testing Effect • Regression to the Mean

Learning Objectives Controlling Extraneous Variables To learn about the experimental setting Confounding Variables—extraneous causal factors because they confound the treatment condition Four Basic Approaches to Control Extraneous Factors 1. Randomization 2. Physical Control 3. Design Control 4. Statistical Control

Experimental Design, Treatment, and Effects Learning Objectives To learn about experimental setting Experimental Design Ex Post Facto Research—nonexperimental designs Factors of the Experimental Design: Researcher has control of variables and manipulates them. 1. Treatment 2. Subjects 3. Dependent variable 4. Plan for extraneous causal factors

Experimental Design, Treatment, and Effects Learning Objectives To learn about experimental setting. Treatment Variable -Independent variable that is manipulated Experimental Groups 1. Control Group—the group in which the independent variable is not changed during the course of the experiment 2. Test Group—the group that is exposed to manipulation (change) of the independent variable Experimental Effects The effect of the treatment variable on the dependent variable

Limitations of Experimental Research Learning Objectives To learn the limitations of experimentation in marketing research. The High Cost of Experiments • Time • Money Security Issues • exposing to the actual marketplace • competitors Implementation Problems • cooperation • contamination • lack of control group

Selected Experimental Designs Learning Objectives To compare experimental designs. Three Pre-experimental Designs • One-Shot Case Study—pre-experimental design with no pretest observations, no control groups, and an aftermeasurement only • No pretest observations • No control group of test units • Lacks internal validity • One-Group Pretest-Posttest Design—pre- and postmeasurements but no control • Static-Group Comparison Design—pre-experinmental

Selected Experimental Designs Learning Objectives To compare experimental designs. Three Pre-experimental Designs (cont’d) • One-Group Pretest-Posttest Design—pre- and postmeasurements but no control group • History • Maturation • Only one pretest observation • Static-Group Comparison Design—pre-experinmental • Absence of pretests • Not assigned to the groups randomly

Selected Experimental Designs Learning Objectives To compare experimental designs. True Experimental Designs • Before and After with Control Group Design • Mortality • History • Solomon Four-Group Design • Second experimental group no pretest • Second control group only posttest measurement • After-Only with Control Group

Selected Experimental Designs Learning Objectives To compare experimental designs. Quasi-Experiments Developed to deal with external validity Researcher lacks complete over the scheduling of treatment or must assign treatment in a nonrandom manner. Interrupted Time-Series Designs • The treatment interrupts repeated measurements. • Cannot control history Multiple Time-Series Designs • An interrupted time-series design with a control group.

Learning Objectives Test Markets To gain insight into test marketing. Test Markets Defined Any research that involves: • Testing a new product or change in an existing marketing strategy. • The use of experimental or quasi - experimental procedures Test Market Usage and Objectives • Estimate of market share • Effect on sales of similar products • Characteristics of consumers • Behavior of competitors

Learning Objectives Test Markets Direct Costs of Test Marketing Costs include: • Commercials • Advertising • Media • Research • POP • Coupons • Sampling • trade allowances To gain insight into test marketing.

Learning Objectives Test Markets To gain insight into test marketing. Indirect Costs of Test Marketing Costs include: • Management time • Diversion of sales activity • Negative impact of test market failure • Negative trade reactions to products • Cost of letting competitors know what the firm is doing

Learning Objectives Test Markets To gain insight into test marketing. Decision To Conduct Test Marketing Benefits • Good estimate of product’s sales potential • Identify weaknesses of the product and the proposed marketing strategy Factors to Consider • Weight the cost and risk of failure • Likelihood and sped product can be copied • Damage an unsuccessful new product would inflict

Learning Objectives Test Markets To gain insight into test marketing. 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 5. Execute the Plan 6. Analyze the Test Results

Learning Objectives Test Markets To gain insight into test marketing. Simulated Test Markets (STM) • uses laboratory approaches and mathematical models to simulate test market results Other Types of Test Marketing • A rolling rollout • Lead country strategy

Learning Objectives SUMMARY • What is an Experiment? • Demonstrating Causation • The Experimental Setting: Laboratory or Field • Experimental Validity • Experimentation: Summary Of Basic Issues • Test Markets