Marketing research of loans without collateral for banking industry (BIDV, Quang Trung Branch)

VIETNAM NATIONAL UNIVERSITY, HANOI HANOI SCHOOL OF BUSINESS Nguyen Huyen Chau MARKETING RESEARCH OF LOANS WITHOUT COLLATERAL FOR BANKING INDUSTRY BIDV, QUANG TRUNG BRANCH Major: Busi

VIETNAM NATIONAL UNIVERSITY, HANOI

HANOI SCHOOL OF BUSINESS

Nguyen Huyen Chau

MARKETING RESEARCH

OF LOANS WITHOUT COLLATERAL FOR BANKING

INDUSTRY (BIDV, QUANG TRUNG BRANCH)

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

1 HOANG ANH TUAN, PH.D

HANOI - 2007

ACKNOWLEDGEMENTS

I express my sincere thanks to Mr Do Huy Hoai, Manager of BIDV Quang Trung Branch This thesis content can not be completed without his suggestions and supports I also acknowledge Ms Do Phuong Anh; Mr Bui Xuan Dong and other staffs of their guidance and contribution throughout the research

I would like to offer my appreciation to Prof Truong Gia Binh who always encourage us try to study hard To my supervisory panel, I offer my sincere thanks

to Dr Hoang Anh Tuan, MBA Tran Phuong Lan for their suggestions and comments To Ms Tran Phuong Lan, thank you very much for your time, your whole-hearted guidance and encouraging me during the research I also thanks to MBA Ha Nguyen, Ms Nguyen Huyen Huong and the other faculty members for their helps and advices

I would like to send my special thanks to my parent, thanks for your immeasurable support and encouragement

TABLE OF CONTENT

Abstract ……… i

Tóm tắt ……… iii

Acknowledgements ……… v

Table of content ………vi

Abbreviations and acronyms ……… ix

INTRODUCTION 1 NECESSITY OF THE THESIS 1

2 PURPOSES 2

3 KEY AREA RESEARCH 2

4 METHODOLOGY 2

5 CONTRIBUTIONS OF THE THESIS 3

6 OUTLINE 3

CHAPTER 1 BACKGROUND OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM (BIDV), QUANG TRUNG BRANCH 1.1 BACKGROUND 5

1.2 SERVICE OVERVIEW 6

1.2.1 Banking services offer for Enterprises 6

1.2.2 Banking services offer for Individual Customers 6

1.2.3 Banking services offer for Credit Institutions 6

1.2.4 Loans without Collateral 6

1.3 SWOT ANALYSIS 8

1.4 STRATEGIC PLAN IN THE NEXT FEW YEARS 10

1.5 CONTRIBUTIONS OF THE THESIS FOR BIDV QUANG TRUNG BRANCH 11

CHAPTER 2 : THEORETICAL FOUNDATION 2.1 FUNDAMENTALS OF MARKETING RESEARCH 13

2.1.1 Marketing research definition: 13

2.1.2 Stages in the research processes 14

2.2 LOANS WITHOUT COLLATERAL IN OTHER BANKS 25

2.3 SOME MARKET SURVEYS OF LOANS WITHOUT COLLATERAL 29

CHAPTER 3 : CONDUCTING MARKET SURVEY FOR “LOANS WITHOUT COLLATERAL” OF CREDIT DEPARTMENT, BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM, QUANG TRUNG BRANCH 3.1 SURVEY DESCRIPTION: 32

3.1.1 Objectives: 32

3.1.2 Research design 33

3.1.3 Sampling 33

3.1.4 Data collection 35

3.1.5 Limitation 35

3.1.6 Data processing method 35

3.2 RESULTS 35

3.2.1 The willingness for a bank loan: 35

3.2.2 Staffs and officials concerned about this new Credit product: 36

3.2.3 Brand awareness: 36

3.2.4 Factors impact to Client’s demand of making loan at bank: 36

3.2.5 Purpose of a loan at bank: 38

3.2.6 Classify client under amount of loan 42

3.2.7 Classify client under credit term: 43

3.2.8 Client’s evaluation about banking terms: 43

3.3 CONCLUSIONS 44

3.3.1 Client demand information: 44

3.3.2 Individual information: 44

CHAPTER 4 RECOMMENDATION 4.1 TARGER MARKET 46

4.2 HOW TO APPROACH TARKET MARKET 46

4.3 SERVICE 46

4.4 DIFFERENCIATION 47

4.5 IMPROVE MARKETING AND PROMOTION ACTIVITIES 47

REFERENCES APPENDIX APPENDIX A: PLAN OF THE MARKET SURVEY 49

APPENDIX B: QUESTIONNAIRE: 51

APPENDIX C: TABLE OF COLLECTED DATA 52

ABBREVIATIONS AND ACRONYMS

BIDV: Bank for Investment and Development of Vietnam

BIDV HO: Bank for Investment and Development of Vietnam, Head Office SOCB: State-owned Commercial Bank

JSB: Joint-stock bank

JVs: Joint ventures

ATM: Automated teller machine

SOE: State-owned enterprise

GDP: Gross Domestic Product

MIS: Management Information System

IMF: International Monetary Fund

CPI: Price consumption index

INTRODUCTION

1 NECESSITY OF THE THESIS

The rise in importance of marketing research within business firms is tied directly to the increased role played by marketing within business in general In the early 1900s marketing was really synonymous with selling The activities of most firms centered on production, and marketing activities were viewed merely as auxiliary to the production of the product This attitude resulted from the demand-supply conditions that prevailed prior to 1930 While there were occasional business downturns, they tended to be short duration, and upon their conclusion emphasis was back on increasing production since demand tended to consistently exceed supply

However, the prolonged depression of the 1930s made many firms aware that movement of goods was critical to their total operation, and thus marketing as a functional area was given more emphasis But, the era from 1930-1950 (with the exception of the war years) would have to be viewed as sale oriented as opposed to marketing oriented The thrust was toward trying to improve sales procedures rather than trying to develop a total marketing program In 1950s firms became aware of what is now called the “marketing concept” This concept states that a firm’s activities should revolve around customers’ wants and needs-the customer is the focal point of all business activities

With increased acceptance of the marketing concept, it became evident that more information about customers and potential markets was needed The desire for such information gave impetus to marketing research Prior to 1940, most of the so called marketing research should have been labeled market research since it usually was concerned with obtaining data about specific locales In the 1950s research related

to marketing activities was broadened to include all managerial aspects-price, product, place and promotion In the late 1950s, marketing research was carried to

an extreme, especially as it related to motivational research By the mid-1960s research courses had been in most business schools for over a decade Business students in colleges not only received training in computers, but many had two or three courses in statistics, giving them a much more quantitative background than their predecessors

With a course of Statistic subject, we have just approached from school Moreover,

to meet the demand of accurately customers’ information from banking industry, I decided to choose the thesis “Conducting marketing research for Individual Loan of Bank for Investment and Development of Vietnam, Quang Trung, Branch”

2 PURPOSES

The purpose of this thesis aims to:

 Give an overview of Loans without collateral and how banks in other countries offer these kinds of loan

 To understand the Marketing research process and how to apply marketing research in banking industry

3 KEY AREA RESEARCH

 Conducting market survey for Personal Loan without Collateral for Credit Department in BIDV Quang Trung Branch

 The survey was implemented inside Hanoi, through nearly 15 enterprises and organizations

4 METHODOLOGY

Information is the primary data resource I collected information through distributing 600 questionnaires to companies and organizations of Health, Education, Corporation, Auditing and Security industries

Besides that, I have studied some Marketing research books to learn how to design a research market plan and the ways to analyze raw information I have used SPSS, statistics software to analyze the collected data

5 CONTRIBUTIONS OF THE THESIS

With the purpose to conduct Personal demand for Loans without collateral survey in Hanoi market, the thesis has contributed some ideas for Credit Department, BIDV Quang Trung Branch as follow:

 Firstly, give out a systematical approach and marketing research theory application in banking industry;

 Secondly, apply academic knowledge to conduct market survey for Personal Loan; which help BIDV Quang Trung Branch managers can make decision

to choose target market to launch new Personal Credit services

 Thirdly, find out best recommendations, which help BIDV Quang Trung Brach managers can have useful customer information for current and next credit services as well as build a standard process in marketing research

6 OUTLINE

The thesis is divided into five chapters as shown in below figure In the first chapter

a background to the selected area is presented by state purposes of choosing the thesis topic, the outline for overall thesis and the methodology using for the research The second chapter is background of BIDV Quang Trung Branch The third chapter is literature review of marketing research definitions as well as banking surveys for loans without collateral in the world The fourth chapter is case study method, analyze the collected data The final chapter is recommendation from Case study and conclusion

Chapter 3 Case Study

Figure 1: Thesis Outline

CHAPTER 1

BACKGROUND OF BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM (BIDV), QUANG TRUNG

BRANCH

1.1 BACKGROUND

Bank for Investment and Development of Vietnam (BIDV) was established on April

26, 1957 It was one of the four largest State-owned banks in Vietnam Up to December 31, 2004, its total asset was nearly 104,000 billion VND Nowadays, BIDV’s organized system divided into 5 sectors: State-owned bank sector, Corporation sector, Administrative unit sector, JV sector and Investment sector Total number of staffs and officials who work for the system are 8,000 people in the year of 2004 BIDV had been known as the major bank, which provided long-term, mid-term and short-term loan for every objectives, it also had experiences in investing to main government projects BIDV has defined its goal is: Effect, Security, Growth and International integration

In customer relation, BIDV’s mission: “Trading effect of customers is the BIDV’s operational objective”, relation between BIDV and their customers is co-operate relation, sharing experiences, difficulties as well as opportunities So, BIDV staffs always listen to customer opinions in order to improve continuously their service quality With commitment “bringing banking products and services with high quality, best benefits to customers”, BIDV always achieve ISO 9001:2000 certificates in recent years

BIDV now have 64 branches around Viet Nam BIDV Quang Trung branch is one

of branches of BIDV, located in 53 Quang Trung Street, Hoan Kiem district, Hanoi BIDV Quang Trung branch currently offer three kinds of banking services:

 Banking services offer for Enterprises

 Banking services offer for Individual Customers

 Banking services offer for Credit Institutions

1.2 SERVICE OVERVIEW

1.2.1 Banking services offer for Enterprises

 Service organize Agent

 Service organize import and export

 Service organize capital

 Service personal prize

 Service personal credit

 Others

1.2.3 Banking services offer for Credit Institutions

 Service finance1

 Service finance2

1.2.4 Loans without Collateral

The Vietnamese government has taken a number of steps in strengthening the regulatory regime in the recent past, but there are still substantial reforms that need be made to the regulatory framework The amendments to the LCI, passed by the National Assembly on May 26, 2004, become effective on October 1, 2004

These new amendments further clarify the separation of policy and commercial lending, enhance the decision making autonomy of credit institutions and widen the range of the types of deposits It allows banks to offer loans without collateral and squarely puts responsibility for credit decisions with the banks

 Product description: Loans without collateral is one of the Banking

services offer for Individual Customers Of which borrowers can loan without collateral Payment resources are from salary per month and

other legally incomes that borrowers can pay for the Bank regularly

Borrowers have to work within the Bank or other organizations with

at least 3 years seniority

 Lending method: Most of BIDV’s branches in the North are lending

money to staffs and officials who work in these branches only However, BIDV’s branches in the South are lending money to staffs and officials who work outside the Bank For example, now these branches offer this loan to staffs and officials who work in Health and Education industries, etc These borrowers must have at least 3 years seniority

Some lending methods are being applied at these branches:

 Lend directly to staffs and officials: Branches’ officials sign Contracts directly with each borrowers On maturity date, borrowers have to pay for the bank or the bank withdraws automatically from borrower’s deposit account With this method, the bank can collect customer information directly However, it is difficult for the bank to withdraw borrower’s debt if he/she does not make deposit account at the bank These branches have solved this problem by: this lending method is implemented if borrower is guaranteed by his/her manager

 Lending through the third party: The third party will sign Contract to the Bank With this method, the bank will not contact directly to borrowers So, loan security depends on the third party

 Lending to a group of staffs and officials: This lending method was one of the most effective way, the bank and company will sign Agreement Contract in which the bank will lend to Company’s staffs and officials and Company is responsible for collecting money of staffs and officials to pay the Bank

1.3 SWOT ANALYSIS

 Strength:

- BIDV is one of the biggest State-owned banks in Vietnam BIDV also build in mind of customers as high prestigious bank, with a big network of branches around Vietnam The Bank can offer banking products with competitive interest rate

- BIDV, Quang Trung Branch was established to specialize in providing credit products for Non State-owned enterprises and individual clients

- Well-trained, young, enthusiastic staffs that help BIDV, Quang Trung Branch improve continuously quality of banking services

 Weakness:

- BIDV, Quang Trung Branch is one of new branches of BIDV Before establishing, the Bank had traditional clients; most of them were SOEs So, the Bank is lacking individual client databases

- BIDV, Quang Trung Branch does not focus on marketing in order to research customer demand as well as to improve its image in individual client’s mind

- Credit procedures still handle slowly; this takes time of clients when they want to borrow at bank quickly

 Opportunity:

- International integration open an opportunity to international cooperation in

financial and monetary activities between the central banks and in managing the monetary policy between the commercial banks in their transactions, and

to strengthen supervision and risk prevention Vietnamese banks can take advantage of capital, modern technology, management experience, and to develop the comparative advantage of Vietnam banking to catch up with the competition both indomestic and foreign market

- Average Vietnamese GDP is estimated about 8.4 percent in 2005 compare with 7.7 percent in 2004 Vietnamese economy is developing with high growth rate of GDP This is a potential market for banking industry

- BIDV Quang Trung branch is located in central of Hanoi where people have high income as well as living standard, and population density is crowded in this area These create advantages for the Bank to diversify its

banking services to individual clients

 Threat:

- Growing competitive pressure in domestic market for banking: The opening up of the financial market will pave the way for foreign banks to penetrate the domestic financial market, thus the number of stronger competitors will increase, with better technology, and business management skills compared to Vietnamese banks

- Poor performance for Vietnamese banks: The Vietnamese banking system

is currently characterized by low competitiveness, weak financial resources, small scale, low quality and efficiency, low professional skills in management, low technology, and high risk Currently, the 4 largest banks

account for 76% of total deposits and 73.5% of total lending of the whole system; but their equity is only about US$ 800 million, with the average capital adequacy ratio of 5% (the minimum international standard is 8%) This reflects the weak capability in sustaining risks Credit remains the key business and source of income for the banks Products and services of the banks are poor, with low convenience Most of the commercial banks do not have an effective and sustainable business strategy Staff qualification of most banks is inadequate to access new technology and modern banking The supervision and internal audit remains weak The information system, financial reporting, accounting, including the management information system do not achieve the international standards and practices

1.4 STRATEGIC PLAN IN THE NEXT FEW YEARS

According to restructuring plans in 20011 of the four SOCBs, BIDV is reforming in areas such as organizational structure, enhanced technological applications and improved risk management The Bank has gradually transformed into more commercially oriented financial institutions, including improvements to credit policies and procedures, accounting practices, information systems Through these reforms, the Bank has been able to increase number of products and services offered

to clients

With the mission “Success of clients is BIDV’s goal”, BIDV Quang Trung Branch set a target of 1,500 billion VND turnover for Credit Department in 2006 In order

to implement this target, first the Bank considers human resource as the most

important factor Well trained and young staffs help the Bank build strong

relationship with its clients The Bank should build communication training courses and processes for new staffs, set standard banking criterias to evaluate staff behaviors and implement Customer Relationship Management program to retain current and attract new clients The Bank also need to have a plan for human

1 Dr Phung Khac Ke, WTO accession and banking reform in Vietnam

resource development, in terms of professional skills, language, to meet the demand

of intergration and international competition

Organization restructuring: the organizational apparatus of the commercial banks

should be reformed to be client driven and to respect market principles The policy lending directed by the government should be totally separated from the commercial activities of the Bank, by setting up a number of policy banks, so that the Bank can focus on their profit oriented function The autonomy and accountability in business

of the Bank should be enhanced, with minimum subsidies and protection involved

in banking activities

Financial restructuring: The commercial banks should be supplied with more

chartered capital, and non-performing loans completely settled to improve their

financial health, competitiveness, and resistance to risks For the SOCBs, the

recapitalization should ensure the capital adequacy ratio of at least 8 percent and to complete the settlement of non performing loans by 2005

Restruturing in banking supervision and inspection: the Bank has to prepare and

implement the new business strategy, with focus on the expansion of activities, improving the competitiveness and technology modernization, diversification, with more features to the products and services in modern banking

1.5 CONTRIBUTIONS OF THE THESIS FOR BIDV QUANG TRUNG

BRANCH

Through IMF survey2”Healthy Banks are vital for a strong economy” in 2000, it is showed that customer information system is one of weak points of banks in developing countries

Vietnamese banks also have the same problem In fact, there is opinion that credit institutions of Vietnam especially State-owned commercial banks and joint-stock commercial banks lack a large number of personnel who trained, skillful and have a

2

IMF survey in 2000

good virtues in the fields of policy and strategy making, inspection and supervision, credit and currency, marketing, research and development of new products and risk management The weaknesses make commercial banks more fragile in increasing competitions The risk can grow when those banks apply new technology

Vietnamese banking see the important of marketing in banking industry However, most of banks only have one Marketing department in their Head offices; these marketing departments are responsible to make strategies for all banking system included marketing strategy for head office and branches

For BIDV Quang Trung Branch, it is one of the branches of BIDV, so it does not have marketing department In order to expand banking services, Quang Trung branch realizes that marketing research is one of the most crucial tools which help

the Bank can understand customer behaviors and offer suitable banking services to

each target market segment Currently, most of marketing activities are implemented by Credit Department Quang Trung Branch conducts marketing research by surveys, individual interviews, and observations The ways to do marketing research in Quang Trung Branch is still very simple and un-standardized The collected information is not appropriate with which the Bank needs

This thesis was conducted according to the demand of Bank The outcome of this marketing research will provide the Bank customer information database include the demand of banking services, individual information and give out strategies how

to approach this segment for the Bank The thesis not only provides theory approach but also was implemented practically From practical results of the survey, the Bank will built standard steps in marketing research

In short, with new economic trend, Vietnamese State-owned Banks not only focus on offering banking services to big customers, but they also realize that individual client is attractive market segment to join Quang Trung Branch gradually improves its operations, particularly in marketing activities to approach this market segment

CHAPTER 2

THEORETICAL FOUNDATION

2.1 FUNDAMENTALS OF MARKETING RESEARCH

2.1.1 Marketing research definition:

The task of marketing research is to make the information used in decision-making more accurate The emphasis of marketing research is to shift decision makers from intuitive information gathering to a systematic and objective investigation Marketing research is defined as:

The systematic and objective process of gathering, recording, and analyzing data is for aid in making marketing decisions

William G.Zikmund3 has defined marketing research is a process in which the research information is not intuitive gathered The author means that at first marketing research has been a patient study and scientific investigation, researcher takes another, more careful look at the data to discover all that is known about the subject Second if the information or data gathered, recorded, and analyzed is to be accurate, the marketing researcher must be objective This definition of marketing research also points out that its objective is to facilitate the managerial decision making process for all aspects of the firm’s marketing mix: pricing, promotion, distribution, and product decisions The definition is not restricted to any one aspect

of the marketing mix By providing the necessary information upon which to base decisions, marketing research can reduce the uncertainty of a decision and thereby

3

Zikmund, Exploring Marketing research, marketing research definition, 2 nd Edition

reduce the risk of making the wrong decision However, research should be an aid

to managerial judgment and not a substitute for it

American Marketing Association has defined marketing research is the function that links the consumer, customer and public to the marketer through information-information used to identify and define marketing opportunities and problems; generate, refine and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process Marketing research specifies the information required to address these issues, designs the methods for collecting information, manages and implements the data collection process, analyzes, and communicates the findings and their implications However, this is a very long and involved definition of marketing process

Palmer (2000) has defined marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i.e marketing research into the elements of the marketing mix competitors, markets and everything to do with the customers

2.1.2 Stages in the research processes

Marketing research often follows a generalized pattern The stage are: (1) defining problem, (2) planning a research design, (3) planning a sample, (4) collecting the data, (5) analyzing the data and (6) formulating the conclusions and preparing the report These six stages are portrayed as a cyclical process The circular flow concept is used because the conclusions from research studies usually generate new ideas and problems that need to be investigated

Figure 2: Flow Chart of the Research Process

2.1.2.1 Defining problem

Careful attention to problem definition allows the researcher to set the proper

research objectives If the purpose of the research is clear, the chances of collecting the necessary and relevant information –without collecting surplus information- will

be much greater

To be efficient, marketing research must have clear objectives and definite designs It should be emphasized that we are now using “problem” to refer to the managerial problem and the information needed to solve the problem This must precede a determination of the purpose of the research Frequently the marketing

Problem discovery

Secondar

y data

Experience survey

Pilot study

Selection of exploratory research

Problem definition

Selection of research method

Experiment

Lab Field

Selection of sample design

Collection of data

Editing and coding data

Data Processing

Interpretation of findings

Problem Definition

Research design

Sampling

Processing and Analysis

Conclusion

Survey Telephone Mail Personal Interview interview

Observation Secondary

data study

Recommendation

researcher will not be involved until line management has discovered that some information is needed about a particular aspect of the marketing mix – even at this point the exact nature of the problem may not be well defined Once a problem area has been discovered, the marketing researcher can begin the process of precisely defining it

William G.Zikmund4 has considered “defining problem” as iceberg principle A

sailor on the open sea notices only a small part of an iceberg Only 10 percent of

an iceberg is above the surface of the water, while 90 percent is sub-merged The dangerous part of many marketing problems, like the submerged portion of the iceberg, is neither visible to nor understood by marketing managers If the submerged portions of the problem omitted from the problem definition, the decision based on the research may be less than optimal

George Kress5has defined this stage as “identifying the disorder” A disorder is a lack of information or state of confusion about either (1) what specific factor is causing a state unrest, or (2) which alternative action should be selected

Although the defining problem stage of the research process is probably the most important one, it is frequently a neglected area of marketing research A problem definition error or omission is likely to be a costly mistake that cannot be corrected

in later stages of the process

2.1.2.2 Planning the research design

After the researcher has formulated the research problem, the research design must

be developed A research design is a master plan specifying the methods and procedures for collecting and analyzing the needed information; it is a framework for the research plan of action The objectives of the study determined during the early stages of the research are included in the design to ensure that the information

collected is appropriate for solving the problem Zikmund6has classified research design into four kinds: survey techniques, experiments, historical data, and observation

Survey techniques

Personal interviews, telephone interviews, and mail or self administered questionnaires are the three major survey methods of gathering data and communicating with individuals

Telephone surveys:

a Advantages:

There are several advantages to telephone surveys: Costs are especially low; the

speed advantage is obvious in that travel time between interviews is not needed, nor

is time lost waiting for returned questionnaires Telephone surveys are the most effective method when data is needed in a short period of time They also provide uniformity in the questioning process and control over the interviewers In many telephone surveys, interviews are conducted from a central facility by groups of interviewers This enables supervisors to monitor selected calls to ensure that prescribed questioning procedures are being followed

b Disadvantages:

 Incomplete universe

 Use visual aids: Some surveys require interviewee to react to a picture,

an ad, a design, etc Unless these are mailed before hand, such reactions can’t be obtained

 Length of interview: It is difficult to keep interviewees on the phone for any length of time if the survey is not of keen interest to them Thus, surveys of a general nature and with a general audience must be brief

6

G.Zikmund, Exploring Marketing Research

There have been successful telephone surveys requiring 25 to 30 minutes, but their acceptance has been due primarily to the fact they were well devised and pertained to a subject of major interest to the interviewee

 “Right to privacy” issue: The increasing desire among people to protect their privacy may greatly inhibit the use (or value) of telephone surveys

in the future Households already can place their names on lists that prevent them from receiving “junk mail” There is also the possibility that in the near future telephone owners may be able to put their names

on a list that identifies them as not wanting to receive any commercial oriented calls

 Other disadvantages: It is difficult for the interviewer to validate the information obtained The interviewer must take the interviewee’s word

on questions related to income, products owned, nature of residence, etc In personal interviews, the interviewer can actually observe and judge the accuracy of some of the interviewee’s statements Another problem associated with telephone interviews is that in recent years a number of firms selling products or services use such interviews as a gimmick to gain original contact with people During the “fake” interview they switch to a sales pitch for their products This experience has occurred often enough that many would be interviewees are reluctant to participate in any telephone surveys

The most effective way to increase responses to phone surveys is to send a letter or card in advance notifying a person of the upcoming call and its general purpose

Mail surveys:

a Advantages

 Wide distribution: The mail travel to all parts of our country; therefore

if a proper mailing list can be obtained, all potential sample members should be reached This also means there is not an over representation

of “desirable” neighborhoods or an ignoring of “bad” neighborhoods,

as often occurs when personal interviews are involved

 No interviewer bias: The respondents are not influenced or inhibited

by the presence of an interviewer They also are more willing to answer somewhat personal questions

 Cost: It can be an inexpensive way to obtain information, especially when the potential interviewees are spread over a wide geographic area But the expenses must be evaluated on the basis of cost per response As the rate of response increases, costs per response go down rapidly If follow-up letters are used to increase response, their costs must also be included when determining “cost per response”

 Possibility of more accurate reply: Persons responding to mail questionnaires can do it at their own leisure and thus may give more thought to their answers or seek help from others on questions about which they are in doubt

b Disadvantages

 Time involved: It can take anywhere from two to four weeks before a majority of the returns are in If follow up letters are used, the return period is further lengthened

 Non- response bias: In any questionnaire that does not obtain 100 percent response, a question arises as to whether the respondents are truly representative of the universe under study or, instead, are a unique group How do you cope with non-response bias? One method

is to use follow-up calls or follow-up interviews with a limited

number of the non-respondents Their replies are then compared with those obtained from the original respondents Tests are then applied to see if there were significant differences in the responses of these two groups If none are found it may be assumed that the original respondents are representative of the universe

 Structural shortcomings:

 The questions must be simple and easily understood since there is

no one present to clarify them for the interviewee

 The questionnaire must be relatively short if a decent rate of response is to be realized There tends to be an inverse relationship between the length of the questionnaire and the percentage of responses to it

 When open-end questions are used, their results are hard to tabulate This means that the use of open-end questions in mail interviews should be minimized when a large number of respondents are involved

 Bias due to faulty samples: Bias also occurs when the sample chosen

to survey is not really representative of the population This type of bias is not unique to mail questionnaires, however, since it can exist in any type of survey as well as in observations and experiments

Personal interviews:

a Advantages

 Versatility–flexibility: This method enables the researcher to obtain maximum information It can be used to obtain the interviewee’s reactions to pictures, products, etc It also enables the interviewer to validate answers by observation or by continual probing In addition,

the interviewer can use unstructured questioning and longer questionnaires

b Disadvantages

 Expensive: This method results in the highest cost per response The major expense involves the cost of the interviewer Generally, a more highly qualified interviewer is needed for personal interviews than for telephone surveys Another key cost item is the travel time and expense associated with moving interview to interview

 Influence of interviewer: In an attempt to impress the interviewer, the interviewee may not give completely honest answers In addition, the personal interests and attitudes of interviewers can cause them to interpret responses differently The success of the personal interviews

is closely tied to the skills of the interviewers If they are well trained, conscientious, and can develop rapport with interviewees, the interviews will be a success But if the interviewers ate careless or have trouble communicating with people, the survey will be jeopardized

Experiments

Marketers often undertake experiments to gage how the manipulation of one marketing variable will affect another (causal research) For example, a market researcher for a retail chain may want to study what the effect on sales would be if a point-of-purchase display is moved to different locations in a store The use of causal research has applications for many marketing decision areas including product testing, advertising design, setting price points, and creating packaging Unfortunately, performing highly controlled experiments can be quite costly Some researchers have found the use of computer simulations can work nearly as well as experiments and may be less expensive, though the number of applications of simulation for marketing decisions is still fairly limited

Secondary Research

Sources for secondary research are quite extensive In years past accessing good secondary research required marketers to visit a library or spend large sums of money accessing proprietary electronic databases However, the Internet has changed how secondary research is accessed by offering convenience, accessibility

to a large array of information sources, and generally low cost

2.1.2.3 Sampling

Sampling involves any procedure that uses a small number of items or that uses parts of the population to make a conclusion regarding the whole population In other words, a sample is a subset from a larger population If certain statistical procedures are followed it will be unnecessary to select every item in a population, because the results of a good sample should have the same characteristics as the population as a whole Of course, when errors are made samples do not give reliable estimates of the population

The first step of sampling plan is to identify a target population, the next sampling issue concerns sample size And the final requires the researcher to choose how the

sampling units are to be selected

2.1.2.4 Data processing and analysis

Data processing:

In Data gathering process, there are two steps that include editing and coding in which the data must be converted into a format and answered the marketing manager’s questions Editing involves checking the data collection form for omissions, legibility, and consistency in classification The editing process corrects problems before the data transferred to the computer Before data can be tabulated, meaningful categories must be established for groups of responses The rules for interpreting, categorizing, recording and transferring the data to the data storage media are called codes This coding process facilitates the computer or hand tabulation

George Kress7 has stated clearly 3 kinds of tabulations:

 Manual method: involves manually recording the answers on some central record sheet It is used when only a few questionnaires are involved and the research does not intend to undertake any complex analysis of the data This method has some advantages (1) Simple forms used; (2) “Set-up” time is relatively short; (3) Work can be performed entirely in the office or other informal location; (4) The categories used to code the data are usually kept in terms of their original description rather than being translated into confusing computer language

 Machine method: has some advantages (1) The data can be tabulated with greater speed and accuracy; (2) the computer cards provide a compact record

of the collected data; (3) Tabulation and statistical analysis that are too complex for manual methods can be performed

 Computer programs method: A computer package that is especially useful to marketing researchers is the Statistical Package of the Social Science (SPSS)8 This package is a set of computer programs that include regression-correlation, analysis of variance, chi-square, discriminated analysis and many

7 George Kress, Marketing Research, Tabulating

8 Norman Nie et al., SPSS, 2 nd Edition