Probability theory applications in marketing decision-making

Marketing Simulation

CoffeeTime is interested in the coffee-drinking habits of people in India. What is the problem in asking subjects: 'How many cups of coffee have you consumed in the past 30 days? What subjects would be the most likely to provide an accurate description? How could this question be modified to provide more accurate data?

The problems with asking respondents how many cups of coffee they have consumed in the past 30 days is that first, it is bad research design to not provide an interval-level or ratio-level variable that can be used in higher levels of statistical analyses, where more robust variables can be used. A second issue when asking respondents who much of anything they have consumed in the last 30 days is that this will be imprecise by any standard. People don't typically think in these terms; it is best to provide a basis of cups per day or cups per week, not per month.

The subjects who would provide the most accurate responses are those most coffee-loyal of coffee drinkers in the Indian population, who would quickly be able to extrapolate the three or more cups of coffee they drink per day to 90 cups a month or more. This would also be the case for those that drank no coffee in the last thirty days. So in essence this question would force a duality of the very coffee-loyal and very coffee averse; two segments not of much interest to researching a new coffee chain. This question could be modified to support a more reasonable and evenly distributed set of answers by first providing a range of cups of coffee consumed first, or asking for the average number of cups consumed per day. The point of the research is to gauge consumption on a regularly basis, so either suggested approach would work.

For each of the following, discuss the benefits CoffeeTime managers would find in helping them to obtain valuable information in problem identification research. Discuss whether these data are secondary or primary and justify your answers

Forecasting and business trend research

Market share and market potential

Segmentation and marketing mix research

Image and market characteristic research

In terms of forecasting and business trend research, this would best be acquired as secondary research. This type of research would be most useful for defining the more macro-economic factors that would impact CoffeeTimes' business including exchange rates, tariffs, and more economic factors that could significantly change the business model for the company moving into India. In terms of market share and market potential, this needs to be a combined approach of secondary data (as the simulation showed) and primary research to quantify the coffee drinking public in India per the specifics of coffees to be offered by CoffeeTime. Segmentation and marketing mix research can also be directly purchased through secondary research, even to the point of gaining psychographic and perceptual map data as the simulation is based on. To gain specific psychographic and perceptual data on CoffeeTime specifically however the need for primary research is needed in the cities targeted. In terms of image and market characteristic research this would need to be entirely done from a primary research perspective, assuming CoffeeTime is interested only in their specific brands' image and market characteristics. There are secondary data studies however available for these attributes from a broader standpoint. CoffeeTime's strategic needs for information needs to dictate this decision.

Part 2:

Finally, what additional strategy (or variation on a given strategy) would you recommend to the key decision maker in the simulation to solve the challenge given? Prepare a 350-word memo to the simulation's key decision maker advocating your recommendation.

Based on the initial analysis completed of the Indian market for coffee consumption, there is a further series of research strategies needed to more fully interpret and respond to coffee consumption through India. The steps required from a research plan perspective are as follows:

Focus groups in Mumbai, Delhi, Chennai, Bangalore, Pune and Ahmedabad. The intent of completing these studies is to gain insights into how the differences between independent and franchised coffee shops are perceived in each city, including unmet needs in each city for coffee shop services including access to the Internet and pastry sales as well.

Taste testing methodology across all cities. As part of the Indian market research taste tests need to be completed in each city to ensure the blends offered are consistent with the tastes and preferences of Indian consumers.

Pricing clinics in Mumbai. Delhi and Pune. What is entirely not addressed to this point in any of the research strategy for the Indian market is pricing across the spectrum of cities in the sampling methodology. Pricing elasticities, pricing thresholds and the message pricing plays in branding within the Indian economy all need to be addressed. The focus on pricing as it relates to frequent coffee consumption also needs to be addressed.