Quantitative Analysis for Marketing Management

Transcription

1 Quantitative Analysis for Marketing Management WILLIAM R. KING. Associate Professor Graduate School of Business University of Pittsburgh TECHNISCHE HOCMSCHUtE /\K. INSTlii:! K'!-: BETRIEBSWirC.iCi iar(sl6hre McGRAW-HILL BOOK COMPANY NEW YORK ST. LOUIS SAN FRANCISCO TORONTO LONDON SYDNEY

2 Contents PREFACE vii Marketing and Marketing Analysis 1 THE IMPORTANCE OF THE MARKETING FUNCTION 1 THE DYNAMICS OF MARKETING DEVELOPMENT 2 THE MODERN MARKETING ENVIRONMENT 3 THE MARKETING SYSTEM 4 THE NEED FOR SCIENTIFIC ANALYSIS 6 THE VALUE OF SCIENTIFIC ANALYSIS 8 THE ROLE OF SCIENTIFIC MARKETING ANALYSIS 10 Marketing Decisions 14 DECISION PROBLEMS 14 IDENTIFYING DECISION PROBLEM ELEMENTS 17 SOLUTIONS TO DECISION PROBLEMS 20 MANAGERIAL DECISION PROBLEMS 21 THE SYSTEMS APPROACH 23 INTERDISCIPLINARY TEAMS 24 THE DECISION MAKING PROCESS 25 PRODUCT MANAGEMENT 26 SUMMARY 27 3 A Conceptual Framework for Marketing Analysis 30 THE OUTCOME ARRAY 30 SIMPLIFYING THE OUTCOME ARRAY 32 STRATEGY-STATE OF NATURE OUTCOME ARRAYS 33 STRATEGY-COMPETITIVE ACTION OUTCOME ARRAYS 33 STRATEGY-GENERALIZED STATE OF NATURE OUTCOME ARRAYS 34

3 xiv. Contents EVALUATING AND COMPARING OUTCOMES 36 THE UTILITY CONCEPT 36 THE PAYOFF TABLE 40 BASIC PROBABILITY CONCEPTS 41 RANDOM VARIABLES 44 EXPECTED UTILITY 45 DECISIONS UNDER CERTAINTY. 47 DECISIONS UNDER RISK 50 DECISIONS UNDER UNCERTAINTY 54 THE MAXIMIN CRITERION 55 THE MIN1MAX CRITERION 56 THE MAXIMAX CRITERION 56 THE HURWICZ ALPHA CRITERION 57 THE LAPLACE CRITERION 58 THE REGRET CRITERION 59 SENSITIVITY ANALYSIS 61 SOME DIFFICULTIES AND IMPLICIT ASSUMPTIONS 64 UTILITIES AND STRATEGIES 64 INDIVIDUAL, GROUP, AND ORGANIZATIONAL UTILITIES 64 VALUEWISE INDEPENDENCE 65 UTILITIES AND DOLLARS 67 UTILITY FUNCTIONS FOR MONEY 68 ESTIMATING UTILITIES 70 MONETARY VALUES 74 SUMMARY 76 Marketing Models 83 tg MODELS AS SYSTEM REPRESENTATIONS 83 MODELS DEFINED 84 USING MODELS IN MARKETING 85 A TAXONOMY OF MODELS 86 MODELS AND THE CONCEPTUAL FRAMEWORK 87 A MODEL UNDER CERTAINTY 89 A MODEL UNDER RISK 91 OPTIMIZATION MODELS 93 A SIMPLE OPTIMIZATION MODEL 95 DESCRIPTIVE MODELS 98 MODEL CONSTRUCTION 100 THE MAKEUP OF MATHEMATICAL MODELS 100 THE MODEL SELECTION PROBLEM 101 SOLVING THE MODEL SELECTION PROBLEM 103 MODELS IN THE ANALYTIC PROCESS 104

4 Contents ANALYSIS OF THE ORGANIZATION AND ENVIRONMENT 105 PROBLEM FORMULATION 105 MODEL CONSTRUCTION 105 MODEL SOLUTION 106 SOLUTION TESTING 106 CONTROLLING THE SOLUTION 107 IMPLEMENTING THE SOLUTION 108 SUMMARY Product Decisions 111 WHY INTRODUCE NEW PRODUCTS? 112 PRODUCT PLANNING 115 THE GENERATION OF PRODUCT IDEAS 116 PRODUCT SEARCH A BASIC APPROACH 119 DEVELOPING UTILITY MEASURES FOR PRODUCT SEARCH 122 PRODUCT EVALUATION 132 PRODUCT DEVELOPMENT 151 THE TIMING OF PRODUCT DEVELOPMENT 151 PLANNING AND CONTROLLING PRODUCT DEVELOPMENT 154 SUMMARY Market Analysis and Test Marketing 166 MARKETS AND MARKET AREAS 167 MARKET ANALYSIS 170 AN ILLUSTRATION OF MARKET ANALYSIS 170 MARKET ANALYSIS AND MARKETING DECISIONS 173 MARKET DATA SOURCES 173 TEST MARKETING 175 THE DESIGN OF A PRODUCT TESTING PROGRAM 175 TEST MARKET SELECTION 176 EVALUATION OF TEST MARKET RESULTS 178 TESTING AND CONTROL IN TEST MARKETING 210 EARLY PREDICTION OF MARKET PENETRATION 215 DRAWING INFERENCES TO FUTURE MARKETS 218 COMPETITIVE TEST MARKETING 238 SUMMARY 239

5 xvi Contents Purchasing Decisions 245 PURCHASING WITH FIXED PRICES 249 PURCHASING DECISIONS UNDER CERTAINTY 249 PURCHASING DECISIONS UNDER RISK 266 PURCHASING WITH VARIABLE PRICES 279 PURCHASING WITH QUANTITY DISCOUNTS 280 PURCHASING WITH FLUCTUATING PRICES 284 TECHNICAL NOTE 289 ON THE MATHEMATICS OF TWO-DECISION-VARIABLE PURCHASING MODELS 289 SUMMARY Pricing Decisions 294 A BASIC PRICE MODEL 295 DEMAND ELASTICITY ~ 299 ELASTICITY IMPLICATIONS 300 PRICE DETERMINATION USING THE BASIC MODEL 301 OPERATIONAL PRICING 304 FACTORS AFFECTING PRICING DECISIONS 304 OPERATIONAL PRICING METHODS 309 DEMAND ESTIMATION 311 BASIC TECHNIQUES OF DEMAND ESTIMATION 312 STATISTICAL DEMAND ESTIMATION 318 UTILIZING DEMAND ESTIMATES 320 STRATEGIC PRICING ANALYSIS 321 DECISION TREES IN PRICING ANALYSIS 323 PRICING STRATEGIES 325 SOLVING PRICING PROBLEMS BY USING DECISION TREES 327 COMPETITIVE BIDDING 331 THE BIDDING PROBLEM 333 THE PROBLEM OF BIDDING 338 BIDDING ON SEVERAL CONTRACTS 339 PRICING AND PURCHASING 348 SUMMARY Advertising Decisions 357 ADVERTISING OBJECTIVES 359 THE ADVERTISING BUDGET 362

6 Contents OPERATIONAL BUDGETING 363 ANALYTICAL BUDGETING 366 ALLOCATION OF ADVERTISING EXPENDITURES 373 THE BASIC STATIC UNCONSTRAINED MODEL 374 THE BASIC MODEL WITH A BUDGET CONSTRAINT 376 A SPECIALIZED MEDIA ALLOCATION MODEL 380 MEASURING ADVERTISING EFFECTIVENESS 392 MEDIA EFFECTIVENESS 393 MESSAGE EFFECTIVENESS 408 COMPETITIVE ADVERTISING STRATEGIES 410 THE ADVERTISING GAME 410 TECHNICAL NOTES 420 ESTIMATING THE PARAMETERS OF THE BASIC DYNAMIC ADVERTISING MODEL 420 ON THE DETERMINATION OF SALES RESPONSE 422 ESTIMATING THE SLOPE OF SALES RESPONSE CURVES 423 SUMMARY, Promotional Decisions 430 PROMOTIONAL BUDGETING AND ALLOCATION 432 PERSONAL SELLING 434 SALES ANALYSIS 436 OBJECTIVES OF PERSONAL SELLING 438 SALES FORCE DECISIONS 441 BRAND SWITCHING'ANALYSIS 483 SIMPLE MARKOV PROCESSES 484 MARKOV PROCESSES AND PROMOTION. 487 IMPLICIT ASSUMPTIONS IN BRAND SWITCHING ANALYSIS 490 MEASURING PROMOTIONAL EFFECTIVENESS 491 MEASURING PROMOTIONAL INTERACTIONS 491 TIMING PROBLEMS IN THE EXPERIMENTAL DETERMINATION OF PROMOTIONAL EFFECTIVENESS 498 EXPERIMENTATION IN MARKOV BRAND SWITCHING MODELS 503 SUMMARY Distribution Decisions 512 DISTRIBUTION CHANNELS 513 DISTRIBUTION CHANNEL OBJECTIVES 514

7 xviii Contents DISTRIBUTION CHANNEL DECISIONS 519 PHYSICAL DISTRIBUTION 532 WAREHOUSING DECISIONS 534 TRANSPORTATION DECISIONS 545 SYSTEMS AND THE DISTRIBUTION SYSTEM 559 SUMMARY 561 Appendix Least-Squares Analysis 565 INDEX 567