LEAD STORY-DATELINE: The Wall Street Journal, December 17, 2001.

Despite all the changes initiated since 1998 by McDonald's new CEO, Jack Greenberg, the giant fast-food chain continues to see a decline in quarterly profit earnings. The new made-to-order cooking system, new menu items, and even the reorganized management don't seem to have any positive impact on profit earnings. A weakening world economy and the Monopoly-game scandal, among other things, have been cited as possible reasons for the decline.

In order to find a customer-oriented solution, McDonald's has now hired an army of 150,000 mystery shoppers to evaluate food, cleanliness, and service quality at its more than 13,000 outlets nationwide. These mystery shoppers also collect data on things such as whether employees greeted customers with a smile, whether they offered customers special promotions and larger sizes, and if they filled the order accurately.

The premise behind McDonald's use of mystery shoppers to boost sales is twofold. First, the current service level at McDonald's outlets is not up to the mark, and therefore identifying weak spots could help improve customer service. Second, an improvement in service level will have a positive impact on sales. According to an informal survey conducted by the Wall Street Journal, the overall performance score for McDonald's was about 81.9 percent, compared to an 80 percent average for all restaurants. The scores for three main competitors were 80.1 percent (Burger King), 80.7 percent (Wendy's), and 77 percent (Taco Bell). Thus, it seems that McDonald's chain is no worse than its competitors. Second, the link between improvement in ratings and sales increase is also tenuous. According to one McDonald's franchisee in Texas, who hired its own mystery shoppers and improved its ratings from 80 percent to 92 percent, the "swing in sales" did not follow the improvements.

Does this imply that McDonald's should not try to track service quality and make changes to improve service? According to a McDonald's spokesman, mystery shoppers can be very helpful. He says, "If we stay focused on the needs of the customers, the sales will take care of themselves." Are there any restaurants that score above 90 percent on such ratings? Yes, there are. However, compared to McDonald's, most such companies are relatively small in size. For McDonald's to attain such high levels of service across all its stores would be a huge challenge.

TALKING IT OVER AND THINKING IT THROUGH!

1. In what ways is the use of mystery shoppers advantageous compared to surveys/ interviews?
   
   
2. What does McDonald's want to achieve through the use of mystery shoppers?
   
   
3. What are the two problems identified in the article regarding McDonald's assumptions behind the use of mystery shoppers?

THINKING ABOUT THE FUTURE!

The quality of customer care in service industries is very important. Different companies use different methods to gauge their service quality. Mystery shoppers can be used not only to assess on-spot service quality; they can also be used as an incentive tool to promote superior service. Employees can be rewarded for providing better service based on mystery shoppers' assessment. Companies are likely to continue using a diverse array of service assessment tools (including mystery shoppers) to monitor their service quality. We are also likely to see a greater role of technology in such monitoring.

SOURCES:

Leung, Shirley. "McDonald's Asks Mystery Shoppers What Ails Sales," The Wall Street Journal, December 17, 2001, p. B1, 3.

- Praveen Aggarwal

LEAD STORY-DATELINE: Ebusiness Illuminator, July 20, 2001.

This author has been tracking e-commerce and e-business for two years, and decided to ask marketing executives what they considered to be the biggest problem in online marketing. The answer? "85 percent of them revealed that they did not have business intelligence software in place that would give them meaningful access to the volumes of data they routinely collect about their own customers." Right behind that concern is the problem of getting their messages heard amongst the clutter of the competition. The objective of online marketing is to get and hold the attention of the customer, and clutter makes this a lot more difficult. It was also mentioned that it is perceived that customers view their online marketing efforts as spamming.

Here are the actual results of the survey, in the order of concern:

1. Being heard amid the noise
2. Spam problem
3. Proving effectiveness
4. Misunderstanding of the medium
5. Getting qualified lists/traffic
6. Need for technological savvy
7. Resistance from ad agencies
8. Placement
9. Keeping up with changing options
10. Integrating online and offline data
11. Establishing trust
12. Lack of standards

Overall, these issues spell out an overall message: How effective is online marketing, and who is actually measuring that effectiveness?

TALKING IT OVER AND THINKING IT THROUGH!

1. Considering that marketing research is an informational tool often times directing companies about consumers, can you identify some things that are missing, as far as this study is concerned?
   
   
2. If a company uses this study in order to draw their own conclusions about online advertising, the research changes from primary to ___________ research?
   
   
3. What effect can an online banner ad have on a consumer, even if the consumer chooses not to click on an online the banner ad?
   
   
4. Other than using special software to gather data, what is another research technique that can be used to find out whether or not an online ad would get a click-through?

THINKING ABOUT THE FUTURE!

Although software has been developed that helps companies measure the effectiveness of online advertising, it appears that few companies are actually using it to measure what really counts "their return on investment, or ROI". Once online advertising becomes as regularly accepted as a magazine advertisement, companies may become more interested in measuring effectiveness as they get their products and brand names online.

DIGGING DEEPER

Go online and visit some of your favorite sites. Is there any advertising on these sites? Record the online ads that you see, and whether or not you'd be likely to click on them. Think about whether or not the ads you saw there were designed with messages that will appeal to you as a target market, or are they possibly meant for a different market?

SOURCES:

Gutzman, Alexis D. "The Biggest Problem in Online Marketing," Ebusiness Illuminator, July 20, 2001.

- Paula E. Bobrowski

LEAD STORY-DATELINE: Duluth News-Tribune, June 7, 2001.

If you are in the service industry, how do you find out whether your front-end employees are providing quality service to your customers? If you want to personally experience the quality of service, your own experience may not be representative of an average customer's experience. Employees may recognize you and provide you exceptional service, thereby defeating the very purpose of this exercise. This is where mystery shoppers can really help.

Meet Shirley Howard, one of thousands of contract workers hired nationwide by companies to pose as regular customers to gauge service quality. On a typical day, she works several stores or restaurants per hour, taking notes on cleanliness, customer service, product quality, and so on. Mystery shoppers are used in a wide variety of industries— from video rentals and restaurants to automotive shops and convenience stores. And some clients even arm mystery shoppers with high-tech gizmos to help them record everything they observe better. For example, Taco Bell gives its mystery shoppers digital scales and thermometers, as well as handheld computers for recording their observations. Its mystery shoppers are required to assess each restaurant they visit on six dimensions: cleanliness, hospitality, accuracy, maintenance, product quality, and speed of service (CHAMPS). These shoppers typically spend three to five minutes assessing a restaurant on CHAMPS dimensions.

Mystery shoppers can also work in reward-based programs. In these programs, the mystery shopper reveals his or her identity once the shopping experience is over, and awards prizes to employees who provided quality service. Shoppers working in reward-based programs are typically part-timers who do only a few shops a month. A lot of them are stay-at-home moms or retired people looking for part-time work for some extra cash.

In order to be an "effective" mystery shopper, one has to have good observation skills. Also, it is very important to have the right profile so that the mystery shopper blends in with the client's regular customers.

TALKING IT OVER AND THINKING IT THROUGH!

1. What are mystery shoppers used for?
   
   
2. Mystery shoppers try their best to remain anonymous. Why is a service provider always trying to identify the mystery shopper?
   
   
3. What are two requirements for being an effective mystery shopper? Why are these characteristics important?

THINKING ABOUT THE FUTURE!

Assessment of service quality is important for the service industry. As the U.S. economy becomes more and more service industry dependent, we will continue to see an increased focus on service quality assessment. In addition to the use of mystery shoppers, there are several other ways of determining service quality. For example, customers can be surveyed to give their assessment of their recent service encounters. A company can also establish a 1-800 hotline for customer complaints and suggestions to improve service quality. One can also make use of technology to monitor service quality. For example, web cams can be installed to continuously (or randomly) monitor how your employees are dealing with your customers.

SOURCES:

Godinez, Victor. "Mystery Shopper Enjoys Thrill of the Game", Duluth News-Tribune, June 7, 2001, pp E1, 4.

- Praveen Aggarwal

LEAD STORY-DATELINE: Business Week, February 26, 2001.

Observational research seems to be on the rise among marketers, who are trying to explore the hidden recesses of consumer behavior. Anthropologists and other trained researchers are sent into the field or the screening room to uncover consumer secrets that do not emerge from focus groups. To name a few, last spring, Best Western International Inc. learned not to expand discounts to senior customers and to avoid using the tag "seniors" based on the videotapes of 25 over-55 couples on 3-to-7-day long journeys. 3Com Corp., a technology company, spent four months videotaping how 64 households in three cities used devices from pad and paper to PCs. Based on their observation, 3Com came up with an electronic home organizer, Audrey, with an extremely compact size and simple design. Moen Inc., a plumbing fixture maker, observed over an extended time how consumers used their shower devices by videotaping consumers in the shower. Their observational research uncovered design flaws that posed safety threats. With observational research, the above companies were able to identify problems of current products and even to gain insights into developing new products or marketing strategies.

This article ended with a discussion of limitations of focus groups, a prevailing research method among marketers. The drawbacks include: focus group interview may be dominated by stronger personalities, participants may not be willing or able to admit in public their behavior patterns and motivations, and a research lab setting used by this method may restrict the responsiveness of certain hard-to-reach classes such as preteens.

TALKING IT OVER AND THINKING IT THROUGH!

1. What is the difference between primary data and secondary data? Which type of information did Best Western, 3Com Corp., and Moen Inc. collect in this article?
   
   
2. List some advantages and potential problems/limitations of collecting consumer data the way Best Western, 3Com corp., and Moen Inc. did.
   
   
3. This article also compared observational research with focus group interviews. Briefly describe the focus group interview and discuss the major advantages and disadvantages not addressed in this article.

THINKING ABOUT THE FUTURE!

This article demonstrated the merits of the observational research method through several examples of real world applications. Nevertheless, observational research is by no means the best or most appropriate approach for every type of marketing research need. It is equally important to recognize the limitations and drawbacks associated with observational research. Marketers must carefully evaluate their specific needs and goals in undertaking a marketing research project and employ a method (or multiple methods) that is (are) best suited to their purposes. In addition, in employing observational research to obtain information from consumers, the result also depends, to a great degree, on a well-trained, experienced researcher to analyze the data and interpret the findings.

SOURCES:

Khermouch, Gerry. "Consumers in the Mist: Mad Ave.'s Anthropologists Are Unearthing Our Secrets", Business Week, February 26, 2001.

- Chung-kue Hsu

LEAD STORY-DATELINE: The Wall Street Journal, May 17, 2001.

Observational research is a method for gathering data about consumer behavior. With observational research, data is accumulated by watching how people actually behave. Consumer goods companies can use this data to identify new product opportunities. For example, Proctor & Gamble Co. (P&G), famous for its Tide laundry detergent, Pampers diapers, and Crest toothpaste is planning to film the behaviors of people in about 80 households in various countries. P&G hopes to gain insights into the daily routines of young couples, families, and empty nesters and to learn about their ways of life and habits.

P&G believes that observational research will complement the findings of more traditional research methods such as focus groups and interviews. These traditional methods often rely on verbal or written statements by consumers about their behavior. Due to certain biases, such as socially desirable answers, consumers may stretch the truth. For instance, they might say that they brush their teeth twice a day or only have a handful of potato chips when in fact they often do not brush and eat the entire bag. P&G is optimistic that videotaping will help them to get closer to the truth.

The study, initially, includes households in the United Kingdom, Italy, Germany, and China. After a household agrees to participate, ethnographer-filmmakers record the members' behaviors from the morning until night, usually for four days. One example of such efforts is the multitasking behavior of a mother preparing breakfast for her baby. While carrying her baby, she stirs a pot of noodles with her other hand. Then she carries the baby and bowl to the table, sits the baby on her lap and feeds him. Occasionally, she looks at the morning news on a television set.

Utilizing this data, P&G hopes to develop new products and package designs geared toward needs not explicitly expressed by consumers. This, in turn, would give P&G a competitive advantage and the potential for major growth opportunities.

However, as P&G knows, observational research has its limitations. There is the reactivity problem, which relates to the non-maintenance of daily routine while under observation. The consumer may act differently because he or she is being observed. To reduce this limitation, P&G plans to utilize the observational research in conjunction with its other market studies. P&G controls about 50,000 of such studies and conducts between 4,000 and 5,000 additional consumer studies per year. Another limitation of observations is that it can only reveal what people do but not why they do it. Therefore, again this research method needs to be complemented with other types of research.

TALKING IT OVER AND THINKING IT THROUGH!

1. What is observational research?
   
   
2. What are some advantages and disadvantages of observational research?
   
   
3. How is P&G planning to use the information gathered via observational research?

THINKING ABOUT THE FUTURE!

Observational research is a useful technique for gaining insights into actual consumer behavior. This research method overcomes some of the limitations of traditional survey research to include a potential discrepancy between stated and actual behavior. It, however, has the drawback of the consumers changing their behaviors while under observation. Thus, observational research might not always yield accurate insight into a consumer's daily routines. Therefore, market researchers should not view the data yielded by observational research in isolation and should utilize them only in conjunction with other market research findings. If the results of multiple studies are vastly different, the firm should be cautious about the findings.

A modified version of observational research, yielding perhaps more accurate results about consumption behavior but simultaneously raising huge privacy concerns, is disguised observational research. Here the consumer is not informed about the observation. This, in turn, eliminates the bias of reactivity.

SOURCE:

"P&G Checks Out Real Life" Wall Street Journal, May 17, 2001, B1, B4.

- Birgit Leisen

LEAD STORY-DATELINE: Financial Times, January 31, 2001.

Imagine two groups of 50 people each walking into a supermarket. The first group is told that when they leave the store, they will be asked about their shopping experience, while the second group is not warned about any such survey at the end of their shopping experience. At the conclusion of their shopping trip, both groups are interviewed about the quality of products on the shelf, the helpfulness of the store staff, and their experiences at the checkout counter. Which group do you think would have rated their shopping experience worse?

Based on extant research, one would not expect any differences between the two groups. However, in several experiments conducted by Chezy Ofir of Hebrew University and Itamar Simonson of Stanford University, it was observed that the group that was told about the forthcoming interview was more critical of the store. It appears that telling people in advance that they are going to be surveyed skews the results and produces worse results. Thus, any conclusions drawn from a survey where respondents are warned beforehand are likely to be unrepresentative of the quality of the service as respondents will be more critical.

Why does this happen? One reason could be that respondents who expect to be asked about their experiences are likely to pay more attention to details. But this argument alone is insufficient. The respondents should pay as much attention to the positives as they should to the negatives. Another explanation forwarded by the authors is as follows. When surveyed without prior warning, respondents tend to remember only the outcome, which usually is positive. But when they are forewarned, respondents also pay attention to the service (the process) while they are experiencing it, and the negative aspects stick in their mind. So, the next time you are comparing results from two surveys, first make sure that there were no differences between them in terms of forewarning subjects about the survey.

TALKING IT OVER AND THINKING IT THROUGH!

1. Why do customers evaluate a service worse when forewarned that they would be interviewed at the end of their service encounter?
2. In the light of the findings reported in this article, what precautions would you take as a marketing research manager?

THINKING ABOUT THE FUTURE!

Market research is as much an art as it is a science. If the researcher is not careful, a number of biases and errors can creep into the research, negating its validity. Biases can be introduced by the way questions are worded or the way a particular question is asked. Marketers are finding it increasingly difficult to get respondents willing to participate in their studies because of telemarketing and overuse of telephone/mail surveys. More and more marketers seek feedback from their buyers. If consumers start expecting to be surveyed, given the results of the study reported in the article, they are likely to be more critical of the goods and services they buy.

SOURCES:

Skapinker, Michael . "It's Not What You Ask, It's When", Financial Times, January 31, 2001, p. 10.

- Praveen Aggarwal

LEAD STORY-DATELINE: Australasian Marketing Journal, 8(1).

Hope springs eternal among the marketers of new products. This is particularly true of marketers of high-tech products like the latest wave of cell phones¾the wireless application phone (WAP)¾for they must get their sales and return on investment in a very short time frame. These firms hope that the marketplace will see the benefits of buying their latest inventions, and reward them for their endeavours¾quickly. When we consider that the longer-term aim of marketing is to profitably meet or exceed customers' needs, wants and demands, then it is perhaps surprising to find that so many new products arise through serendipity. Many others come into being because of a planned technological breakthrough after much time and money has been invested. Do customers' requirements come first? Not always is perhaps the most accurate answer.

The high-tech product development game is for high-rollers when comes to getting a return on R&D investment. The economic benefits are high when one considers the fact that the semiconductor business alone, heavily dependent as it is on scientific development, added $A44 billion to the United States economy in the ten years to 1996. The search for such major economic effects partly explains why more studies have been conducted in the diffusion of innovation, across many disciplines, than perhaps any other field of endeavour. At issue is why some innovations spread like a contagious disease, while others languish in sales and ultimately fail due to lack of buyer interest. Some never make it out of the R&D labs. Others don't make it past concept testing with potential buyers. And of course, some do get onto the market when they should not. The diffusion of new products, ideas and the like is seen as a process during which an innovation is communicated through certain channels over time among the members of a social system (Rogers, 1995). The point that all diffusion researchers make is that time is a critical factor in any diffusion process.

Diffusion researchers Morrison, Roberts and Midgely (2000) make the point that most research aimed at predicting buying / nonbuying outcomes has tended to focus on the innovation, or the potential adopters, to the exclusion of the communication process involved. Just as some aggrieved individuals do not tell the world when a product fails, when expectations are exceeded people don't always spread the word about good products or experiences. At issue then is how innovation is communicated over time and by whom. There is much evidence to point to the influence of opinion leaders, and how these opinion leaders are socially integrated, and have personal knowledge and recognised expertise. There is also evidence that there are third party effects in that an individual or organisation may well adopt an innovation because they heard that significant others (in their field) had already adopted the innovation. This is the idea behind a motor company offering advantageous deals to car rental companies to take a new model. Potential buyers see the new model in action and on the road in large numbers, but importantly the signal they receive is that car rental companies are experts and if they are buying …. well the car must be good enough for everyday users.

Turning to the business-to-business setting, Morrison, Roberts and Midgely (2000) add to our understanding of how organisations look to other leading edge status (LES) businesses in their network, and the impact of such opinion leadership and network connectedness. Such opinion leaders are seen to "play a positive role in speeding up the diffusion process" (Morrison, Roberts and Midgely 2000, p.12). Using libraries in this particular study, these authors show the influence of industry links. They show evidence of cliquing by libraries seeing themselves in the same category (eg. business or academic). These researchers show that the part played by libraries with high 'leading edge status' in bridging libraries and outside organisations was greater than that of Innovators as measured by Rogers' time of adoption. Thus, within an industry there are those organisations which occupy an influential role in "speeding up the diffusion process" (Morrison, Roberts and Midgely 2000, p.12) and their influence is not necessarily based on when they themselves adopt or reject an innovation.

TALKING IT OVER AND THINKING IT THROUGH!

In this section we look more closely at opinion leadership, leading edge status (among organisations) and communication in the diffusion of innovation:

1. Describe the typical opinion leader, if there is such a classification.
2. Why are opinion leaders of significance to marketing organisations?
3. Are opinion leaders those who buy new products or take up new ideas earlier than others?
4. How might we inter-relate the notion of opinion leadership and relationships in marketing terms?
5. What are leading edge users (LEUs), or those with leading edge status (LES)?

DIGGING DEEPER!

It is easy to see why marketers are interested in identifying opinion leaders. Not every marketing organisation put its money into advertising and other costly activities aimed at stimulating a purchase. Many rely on word-of-mouth to get their message spread through the marketplace, particularly with the advent of Web communities of product users, chat rooms, newsgroups, and list servers. Identifying opinion leaders can be problematic. Simply having people tell us whether or not they consider themselves to be opinion leaders is open to conjecture. Having key people nominate who they consider to be influential (opinion leaders) is somewhat more accurate. However, sociometry which involves asking people who they seek advice from (referrals) is even more accurate. In their study, Morrison, Roberts and Midgely (2000) used two methods. They asked respondents to self-designate and also asked others to nominate their degree of opinion leadership. As viral marketing is introduced more widely, we can expect greater use of online experiments in identifying opinion leaders and the strength of ties and the various methods employed.

Sociometric analyses are complex and expensive. It is easier to conduct such studies in closed, self-contained communities such as libraries, the defence forces and others where there is relative isolation from the general community and business networks generally. The isolation from broader social networks may make for ease of administration of such studies, however there may also be unintended effects that influence the outcomes of such a study. The study by Morrison, Roberts and Midgely (2000) also measures the ties between interconnected parties and the strength of these ties. This is termed network analysis. The point researchers make is that tie strength is important. There may be strong ties among cliques of libraries, businesses in an industry, universities (eg. ivy-league / brown-stone versus technological institutes), people in adjacent houses in a street, or people sharing the same house. Such strong ties may assist an innovation to spread rapidly among that group. There may be weak ties between groups, which are also important for they act as a bridge and also facilitate diffusion of innovation.

SOURCES:

Morrison, P.D., Roberts, J.H., and Midgely, D.F., "Opinion Leadership Amongst Leading Edge Users", Australasian Marketing Journal, 8(1), 2000 p.5-14.

Rogers, E.M. "Diffusion of Innovations", The Free Press, NY, 1995.

- Stewart Adam