Cover image for The portable MBA desk reference : an essential business companion
The portable MBA desk reference : an essential business companion
Nohria, Nitin, 1962-
Second edition.
Publication Information:
New York : J. Wiley, [1998]

Physical Description:
xi, 680 pages ; 26 cm.
Added Author:
Format :


Call Number
Material Type
Home Location
Central Library HF5356 .P67 1998 Adult Non-Fiction Non-Fiction Area

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Author Notes

NITIN NOHRIA is Professor of Business Administration at the Harvard Business School, where he focuses on leadership and organizational change. An active speaker at industry and company forums, he is coeditor-with James Champy-of Fast Forward, a collection of Harvard Business Review articles on change, and, with Robert Eccles, of Networks and Organizations: Structure, Form, and Action. He is also coauthor of Beyond the Hype, with Robert Eccles; The Differentiated Network, with Sumantra Ghoshal; and The Arc of Ambition, with James Champy.



Excerpt An A-to-Z Reference of Essential Business Topics M Magnuson-Moss Warranty/Federal Trade Commission Improvement Act Legislation passed in 1975 that requires clear disclosure of consumer product warranty terms prior to sale of an item.     The Federal Trade Commission (FTC) is empowered to determine the manner in which product warranties must be made available to consumers. The act also provides for consumer redress, including class action suits. makegood A credit an advertiser gets from a publisher or a broadcaster to make up for an erroneous advertisement or one that doesn't reach the promised audience.     Makegoods must be negotiated between the advertiser and the medium, but they usually involve rerunning the ad or commercial.     In print advertising, makegoods may be given when the publisher makes a mistake in the printed copy (such as an incorrect address) or when the advertisement is placed in a position in the publication other than the one specified by the advertiser.     In broadcasting, makegoods are given when the television or radio station fails to deliver the audience size or composition it promised for a particular commercial or when the commercial does not run as scheduled. EXAMPLE: A lackluster fall television season in 1997 left TV executives grappling with a two-pronged problem: Shortfalls in key viewing segments threatened to limit revenue growth that could be used to offset cash makegoods, while significantly greater up-front ad sales left precious few spots available for rerunning commercials (Levin 1997). make-to-order (custom made) Goods or services produced according to customer-provided specifications, prints, or designs.     Make-to-order items are usually turned out in small volumes with a great deal of variety between products. Consumer-oriented firms such as upholsterers, carpenters, and interior designers traditionally provide make-to-order items. If the item fails to work properly, the customer who provided the specifications is legally responsible for nonperformance. EXAMPLE: The Monsanto Company is using client/server technology at its Pensacola, Florida, fiber plant to produce carpet fiber according to the type, color, weight, density, and amount specified by individual customers. "We are making something for a customer rather than making it and then seeing who we can sell it to," says a Monsanto official (Weston 1996). See also job process system: make-to-stock. make-to-stock Goods produced to the manufacturer's specifications and stored as inventory in anticipation of future demand .     Make-to-stock items are usually turned out in large batches, with only slight variations between individual products.     See also make-to-order. management by objective (MBO) A management method that emphasizes specific, jointly agreed-upon goals for each employee.     With MBO, all affected parties, from upper management to supervisors to shop floor workers, participate in the goal-setting process, which ensures that everyone's concerns are considered in devising realistic objectives.     Each objective should be as explicit as possible, with tangible performance measures and a set time frame clearly stated. For example, instead of simply planning to improve quality or cut costs, zero in on a specific target--such as reducing returns to less than 2 percent of sales over the next six months or cutting costs by 10 percent within the next fiscal year .     A critical component of MBO is performance feedback, which should occur at every level. For example, if the sales force is charged, say, with increasing sales of a line of products by 5 percent during the current quarter, the vice president of sales will study weekly sales figures for each product, while each district manager keeps tabs on the performance of individual sales representatives. The sales reps themselves will monitor their own personal progress toward the goal.     Rewards such as pay raises and promotions are based on the evaluations of employees' progress toward meeting their goals. management control systems The combination of planning, strategy, penalties, and rewards that shape management behavior.     All companies need controls, if only because the necessary act of dividing activities and responsibilities among organization members means that overall corporate goals and strategies will likely be altered slightly by the needs of various individuals. Thus, it is important to encourage consistency by holding managers accountable.     Management control systems are almost always based on some form of financial measurement. A specific financial objective, such as increasing sales or profit, can clarify the issues and decisions faced by managers, even if it does not have the desired effect. There are four broad types of financial responsibility, each with its own set of objectives: 1. Cost centers are activity areas within a company where direct costs can be measured and to which part of the company's overall fixed coats can be allocated. In a factory production department, for example, standard costs of direct materials and labor are specified; it is the manager's objective to minimize the difference between actual and standard costs. 2. Profit centers are areas that are treated as separate businesses for the purposes of management and financial control. Profit center managers are responsible for creating the best possible combination of costs and revenue , with the objective of maximizing profits. Profits can be measured in various ways within the management control system; for example, the sales manager of a product line division is responsible for gross profit , whereas profit figures for the division's marketing manager might include deductions for promotional expenses and factory overhead . 3. Revenue centers are areas that have no control over prices or costs. A sales department is generally thought of as a revenue center, where the goal of the manager may be to widen his or her margin of revenue without exceeding the expense budget. 4. Investment centers are areas within a company where the manager is responsible for purchasing the various assets used by the company. Investment center managers must balance the need for current profits with the need to make investments that increase future profits. Their objective is generally to maximize the department's return on investment (ROI) .     In establishing management control systems, fairness and goal congruence are crucial. Fairness dictates that each manager's financial objectives accurately gauge performance, taking into account all the factors within his or her control while excluding those beyond control. Goal congruence prevents managers from working at cross-purposes by aligning the company's various management control systems so as to serve overall corporate goals and strategies. EXAMPLE: XYZ Widget sets a goal of increasing first-half output by 10 percent and, to accomplish this goal, it establishes a set of monthly production requirements for its factories. The Midwest factory supervisor, concerned with meeting May's production targets and cutting monthly costs, decides to put off preventative equipment maintenance. In June, equipment breakdowns cause the factory to lose five days of production. Although the Midwest plant's May output increased by 10 percent, the June loss more than offset the earlier gain.     The XYZ system lacks congruence between overall company strategy and the Midwest manager's short-term cost-cutting goal.     See also incentive plans. management information system (MIS) A formal, usually computerized, means of supplying managers with the information needed to make decisions.     Originally, the MIS was focused on providing accurate internal information, such as sales and inventory figures. The systems were designed to speed up business processes in order to contain costs and improve administrative efficiency. In recent years, however, the MIS network has been expanded to include an external component, integrating a flow of information from customers, distributors, and suppliers. EXAMPLE: The MIS system for Mrs. Fields cookies includes computer terminals in every store. Each morning, store managers enter a sales projection based on the previous year's performance and answer a series of questions posed by the computer. Questions include "What day of the week is it?," "Is it a normal day, a sale day, a holiday, a school day, or other?," and so on. If it is, say, a Wednesday and a school day, the computer analyzes the store's hour-by-hour, product-by-product performance on the three previous school-day Wednesdays. Using that information, the computer then comes up with a plan for the day that includes how many customers should be served each hour, what types of cookies should be made, and when batches should be mixed and baked.     As the day progresses, the MIS utilizes computerized cash registers to keep track of hourly sales and revise sales projections. It also will make suggestions; for example, if the number of customers is satisfactory but the average check is too small, the system might recommend setting out a tray of samples to encourage more purchases.     When used effectively, the MIS can be a valuable source of competitive advantage , as well as a way to improve communication and coordination among various departments and individuals. management's discussion and analysis of operations (MD&A) A section in an annual report that summarizes the reasons for changes in a company's operations, liquidity, capital resources, and working capital .     The MD&A, which is required by the Securities and Exchange Commission (SEC) , is designed to help readers of financial statements understand the effects of changes in business activity and accounting methods. manufacturing margin In accounting, the excess of sales over the variable cost of goods sold (Fess and Warren 1993, 922). EXAMPLE: XYZ Computer Corporation produces computers that have a variable cost of $1,000 each. It sells these items at $1,500. If the company sells 3,000 computers a year, its sales amount to $4,500,000. But its variable cost of goods sold is $3,000,000. The difference is the manufacturing margin, which in this case is $1,500,000. manufacturing resource planning (MRPII) Complex, computer-based planning system that integrates a wide range of company functions such as engineering, materials requirements planning (MRP), marketing , purchasing, production scheduling, business planning, and finance.     MRPII is a broadening of the scope of production planning, bringing in other functional areas whose input impacts the production decision. The major purpose is to integrate primary functions into the planning process.     Because these systems can also assess the impact of production schedules on resources such as equipment and labor, production planners are able to decide when to shift orders, reduce workloads, or increase capacity with part-time workers, overtime, and so on. marginal cost The increase or decrease in total cost that results from producing one more or one less unit; also called incremental cost .     In manufacturing, marginal cost typically declines as production volume rises. That is because economies of scale arise when fixed costs are spread over a larger number of units, thereby reducing the per-unit cost. Conversely, spreading fixed costs over fewer units raises the per-unit cost. EXAMPLE: A toy maker receives an order for 100,000 units of a plush, tail-wagging, stuffed dog. The total cost--including materials, labor, electricity to run the machinery, and an allowance for fixed costs such as rent and insurance--is $300,000, or $3.00 per dog.     The customer considers increasing the order by another 10,000 units. Since the fixed costs of producing the stuffed dogs are already covered, and since many of the other costs are related to preparing for the manufacturing run, making another 10,000 dogs will add only $10,000 to the toy maker's total cost. The marginal cost for the extra dogs, then, is $1.00 apiece ($10,000 / 10,000 dogs).     Selling the additional dogs for more than $1.00 each will increase total company profit, even though that price does not cover the total cost of producing each dog. But the toy maker must charge at least $1.00 per dog for the additional production because the marginal cost is also the lowest possible sales price before overall company profitability begins to suffer.     Marginal cost analysis can be a handy tool for deciding whether to increase or decrease production.     See also marginal revenue. marginal revenue The extra revenue received from selling one more unit of production.     Marginal revenue is the difference between total revenue before the sale of the extra unit and total revenue after the sale. So long as the price of a product or service remains constant, marginal revenue equals price. EXAMPLE: A radio manufacturer that sells car radios for $250 each receives $250 in marginal revenue if one more radio is sold.     Sometimes, however, additional output can only be sold at a reduced price. So before deciding whether to make more radios, the radio manufacturer must look at marginal cost . If marginal cost exceeds marginal revenue, making additional radios is obviously not a wise move.     See also contribution margin (CM). marginal revenue = marginal cost rule A rule in economics that says a company should produce up to the point where the cost of an additional unit of output (its marginal cost ) is just equal to the revenue earned by selling the additional unit (its marginal revenue ).     Moreover, if the producer has the power to set the price of its product, it should do so at a level where consumers will demand this optimal level of output.     By following this rule, a company can maximize its profit and minimize its loss. However, if the market price falls below the company's average variable cost , this rule is negated. In such a situation, the best thing a company can do is shut down.     See also shutdown situation. market All people who have a specific, unsatisfied need or want and are willing and able to purchase a product or service to satisfy that need. EXAMPLE: The market for automobiles consists of anyone of legal driving age who has a need for transportation, access to roads, and enough money to make an outright purchase or make payments on a car.     Marketers look at consumer interests and income to help determine the most likely buyers for any given product. Many consumers might like to have an in-ground swimming pool, but only those who can afford one are part of the market. A pool builder might look at research data detailing consumer interests and income levels in a specific town or neighborhood, learn who is interested in buying a pool and who can afford one, then target its marketing effort directly to those people.     See also available market; penetrated market; potential market; served market; target market. market aggregation See mass marketing market capitalization rate See expected return market life cycle The stages through which a market passes as it comes into being, flourishes, and eventually disappears.     Four distinct stages comprise the market life cycle: emergence, growth, maturity, and decline. A market emerges when a consumer need is first realized and met. EXAMPLE: Recognizing that the need to make multiple copies of documents was imperfectly satisfied by carbon paper and mimeograph machines, the forerunner to the Xerox Corporation acquired the rights to xerographic imaging in 1947. A year later, the company produced and marketed its first copying machine. A new market had emerged (Source: "A Brief History of Xerox" from the Xerox Web site).     The growth stage of a market is marked by increasing sales and competition. Competitors attempt to discover and fill various niches and segments of the market. In the copier market's growth stage, competitors offered portable and color copiers to attract different market segments. When each segment has been served and competitors begin to eat into one another's sales, the market has reached maturity . A market is in decline when demand for current products wanes or a new technology encroaches on the old. Eventually, the old technology will fall by the wayside and a new market will emerge.     Different marketing strategies are appropriate at each stage of the life cycle. In the emergence stage, when there is little or no competition, a company has three options: * Design a product that appeals to a small segment of the market; this allows small companies to avoid conflict with larger would-be competitors. * Launch two or more products simultaneously to capture several market segments; this is appropriate when consumer preferences are all very different ( see diffusion of innovation curve ). * Target the mass market by designing a product with the widest possible appeal; this is most effective for large companies with substantial resources and distribution capabilities.     Companies entering a market during the growth stage also have three possible strategies: * Pursue a niche strategy ( see niche marketing ) in one small segment. * Compete directly with the market pioneer. * Attempt to serve multiple niches in small segments of the market.     When a market enters maturity, competitive strategies focus on finding new product innovations or reducing prices in order to gain market share . In the decline stage, competitors must decide whether to move to another market or work to increase market share as other companies seek greener pastures.     The whole concept of "life cycle" has taken on a different cast in the computer and communications industries, which are notorious for how quickly products seem to become obsolete. Just ask anyone who bought last year's "most powerful" personal computer model or the cellular phone with "the clearest reception." But not only consumers feel the crunch. n a 1996 survey by OEM magazine, nearly three fourths of the respondents expected product development cycles to speed up and market life cycles to shrink. Yet fewer than half expected R&D expenditures to increase (Lieberman 1996).     See also product life cycle; product maturity. market risk The result of factors such as the state of the economy, interest rates , and inflation that affect the prices of all stocks; also called systematic risk .     Market risk--as opposed to nonmarket risk (or nonsystematic risk ), which involves the risks faced by individual companies--accounts for the fact that stocks tend to move as a group in a particular direction. An individual stock's sensitivity to the conditions that constitute market risk is measured by its beta . A stock with a beta of 1.0 carries the same risk as the total risk of the market as a whole. A stock with a beta of 2.0 is twice as sensitive to market fluctuations as is the stock with a beta of 1.0. That means that if the market drops 10 percent, the stock with a beta of 2.0 will drop 20 percent.     See also alpha; capital asset pricing model (CAPM). market risk premium The rate of return investors demand from a security with a given level of market risk .     In its broadest terms, the market risk premium is the difference between the average return of the overall market and the going rate of interest. The market risk premium for an individual security is calculated using the capital asset pricing model (CAPM). market saturation See product maturity market segmentation Dividing a large, diverse market into smaller parts that share common characteristics.     Companies sometimes develop different versions of a product to appeal to each segment's specific wants and needs. But even if the product doesn't vary, marketers will usually develop separate promotional programs for each subgroup. The marketing mix will be designed to suit relatively homogeneous segments. Sneakers, for example, are worn by everyone from toddlers to grandparents. The basic structure of the shoe worn by a teenage boy might well be identical to that worn by his father, but the exterior will vary dramatically with the addition of decorative trims, colors, and laces. And so, too, the advertising will be tailored to appeal to the different age groups.     Markets can be broken down in numerous ways, as marketers try to find distinctive groups of consumers within the total market. For generic products such as paper clips, no special groups exist, so relying on undifferentiated marketing , or only one marketing program, makes sense. At the other extreme, consumer demand for products such as clothing, furniture, automobiles, and so on is highly diverse. In those instances, a marketer can choose to serve all, many, or some of the market's varying needs and desires.     Markets can also be segmented descriptively by using geographic and demographic variables such as age, ethnicity, gender, educational level, marital status, income, and so on, as well as behaviorally, based on consumer attitudes, lifestyles, product usage, and other fluctuating elements. EXAMPLE: Avon Products, Inc., the world's leading direct seller of cosmetics and beauty-related products, has developed marketing strategies and tactics based on the values, trends, and buying patterns of consumers in the Hispanic, African-American, and Asian-American market segments. Information gleaned from marketing research led Avon to hire a separate advertising agency specifically to address issues raised by the Hispanic community. To appeal to African Americans, the company has added cosmetic color shades appropriate for darker skin tones and also offers more Afrocentric gift items, such as books on Kwanza. As part of its push in the Asian-American market (Chinese, Japanese, and Korean subgroups are being targeted), Avon uses a multi-Asian language brochure and Asian language radio commercials in some areas of the country (Chapman and McFarland 1995).     For market segmentation to work successfully, five criteria must be met. The segment must be: * Identifiable and measurable * Big enough to be profitable * Reachable, so that marketers can communicate easily and effectively with the target group * Willing and able to purchase * Stable, not likely to change rapidly     Market segmentation has both advantages and disadvantages. On the plus side, segmenting allows marketers to direct a larger share of promotional spending to the most promising areas and to vary ad campaigns for different target groups. Moreover, consumers aren't forced to make compromises when they purchase a product because segmentation produces a better match between what the consumer wants and what a marketer offers.     The downside is that as the marketer investigates more and more segments, research costs mount--and so do production costs, because production runs are shorter and economies of scale are lost. Also, the marketer may have to sacrifice sales in one segment as it concentrates on serving another.     See also behavioral segmentation; cannibalization; demographic segmentation; psychographic segmentation; volume segmentation. market share The ratio of one company's sales to total sales by all competitors in a given market .     Market share is arrived at by dividing the sales of the company in question, either total number of units sold or their dollar value, by the corresponding total for all competitors taken together. EXAMPLE: About 15.1 million new cars and light trucks were sold in the United States in 1997. General Motors Corporation, which sold approximately 4.7 million of those, garnered a 31 percent market share (4,700,000 + 15,100,000 = 0.31, or 31 percent; Kerwin and Vlasic 1998).     Market share, which is calculated for a specific period, often a year, is a good indicator of a company's competitive standing because it allows for direct comparison with others in the same market. A company may pat itself on the back for an annual sales increase of 10 percent, only to learn that the market as a whole posted a 50 percent gain; clearly, the company's competitors had a much better showing. Savvy companies continually monitor competitors' market share to benchmark their own progress. market value (1) The price at which a security, product, or service can be sold. market value (2) In accounting, the replacement cost of an item, as used in the lower of cost or market rule. marketable security An equity or debt security that can be easily sold or converted into cash.     Marketable securities may be short-term obligations, such as Treasury bills and commercial paper , or traded stocks and bonds . Companies invest in marketable securities as a way to earn some return on cash that would otherwise be temporarily idle. They are usually carried at cost as a current asset on the balance sheet . marketing The process of planning and executing the strategy involved in getting ideas, goods, and services to the consumer.     Everything from conception of the product or service to positioning, pricing, and promotion to distribution and after-sale relationship is a facet of marketing. In short, marketing means using an understanding of consumers to satisfy their needs while also meeting the goals of the company. It differs from mere salesmanship (persuading someone to buy something), because it involves making an effort to figure out what a customer desires and then helping the company find a way to profitably meet those desires.     Nearly every part of a company's operations has something to do with marketing. When management decides to offer a new product based on market research, it is practicing marketing. So, too, the design department that incorporates features with specific consumers in mind. Even the friendly receptionist who goes out of his or her way to make customers glad they called is practicing effective marketing. EXAMPLE: Pushing hard to overtake competitors in the race for U.S. market share , Taiwan's leading bicycle manufacturer, Giant Manufacturing Company, has put together a package of marketing moves. Attempting to shed what it believes is an undeserved image as a mediocre import, Giant has sponsored high-profile racing teams and secured endorsements from well-known downhill racers. Product offerings have been perked up with the inclusion of desired high-tech features on more of its models. In addition, the company has added new models in the highend (over $1,000) mountain- and road-racing bike category.     And the result of this revamped marketing strategy? Giant appears to be reaching its target market and winning converts: U.S. sales jumped 30 percent in 1997, lifting Giant's market share and propelling it into the ranks of the top-five specialty-bike marketers in the United States (Moore and Engardio 1998). marketing channels See distribution channels marketing mix Tools and techniques a company uses to achieve marketing goals in its target market .     Four elements compose the marketing mix: * Product , which includes quality, assortment, service, guarantee, packaging, and warranty * Distribution , which comprises wholesalers, retailers , sales representatives, warehousing, inventory , and transportation * Price , which includes consumer and competitor reactions as well as cost * Promotion , which covers advertising , publicity, and personal selling     Each element is equally important, although some may get more emphasis than others in particular marketing situations and strategies. In marketing a commodity such as nails, where buyers base purchases primarily on cost, pricing policy would be the central element in the marketing mix. Products such as perfume, on the other hand, rely heavily on promotion and advertising to attract customers.     In most cases, however, successful marketing requires an organization to competently juggle all four elements in the mix. Not only must a company offer an appealing product at an acceptable price, but it must be able to promote the product in a way that attracts the desired customer segment. Moreover, without an efficient distribution system that can deliver the product to the right place, at the right time, and in the amounts needed, all the product, pricing, and promotion effort will be for naught. EXAMPLE: Few companies can match the expertise displayed by Nike, Inc., in balancing the four elements of the marketing mix. The company pins its brand image worldwide on top-quality athletic shoes that promote fitness and performance. This theme drives everything from product development and styling to advertising, merchandising, and pricing.     Yet despite its global focus, Nike knows that sales are made locally. Thus, managers at the local level are given discretion to decide how best to implement the fitness and performance image. And although Nike makes a wide assortment of shoes, it varies its product offerings according to which sports are popular in which countries. Nike also uses geographically popular athletes to endorse its products and tailors its message to fit the market . Distribution outlets and pricing strategies also vary according to the market. Nike's combination of standardized market image and flexible implementation has helped make it the world's leading athletic apparel maker (Roth 1995).     See also four P's. marketing myopia A condition in which a company is so involved with selling that it loses sight of the true nature of its product.     The term was coined by Theodore Levitt, professor of marketing at Harvard Business School.     A company suffering from marketing myopia eventually finds itself overshadowed by competitors. EXAMPLE: The railroad industry is frequently cited as a classic example of extreme shortsightedness. Nearly a century ago, railroad company executives failed to recognize that their product was transportation. Consequently, while they were busy focusing on the railroad business, automobiles and airplanes largely swallowed the passenger market, leaving the rails with only a tiny segment of that market. By defining their industry by product rather than by customer, the railroad companies lost an enormous opportunity for growth. Marketing News A publication of the American Marketing Association. marketing orientation Making the needs and desires of the target market the guiding light of the company.     Companies with a marketing orientation go to almost any lengths to satisfy their customers more effectively than do their competitors. EXAMPLE: Lands' End, Inc., the Dodgeville, Wisconsin, mail-order firm, prides itself on bending over backward to satisfy its customers. Gary Comer, who founded the company in 1963, developed eight principles of doing business that still guide the company today. The principles guarantee high quality, fair pricing, and customer satisfaction no matter what.     And does the company live by its credo? Customer anecdotes indicate that it does. For instance, a question about sizing of a particular clothing item featured in the Lands' End catalog can easily lead to a discussion with the telephone representative about the customer's lifestyle, body type, and preferences as to fit (looser here, tighter there), with the telephone rep apparently well versed as to specific product features. And in the end, there's always the assurance that "you can send it back if it's not right." marketing plan A document that some companies use to outline their marketing strategy and tactics.     The marketing plan is a useful tool for organizing and managing a marketing effort. A good plan contains eight sections as follows: * The executive summary gives a short overview so managers can easily grasp the plan. * An analysis of the current marketing situation presents key background information concerning product, market , technology, competition, distribution, price, and promotion. * An analysis of opportunities summarizes the issues, opportunities, threats, strengths, and weaknesses facing the product. * The objectives lay out the goals for sales, market share , and profits. * The marketing strategy presents the overall approach that will be used to meet the objectives. * The plan of action specifies how the plan will be implemented. * The financial projections and costs state the budget and anticipated consequences. * The control mechanisms explain how the plan will be monitored. marketing research Systematic, objective gathering of information for use in dealing with specific marketing issues.     Marketing research, first used in the 1920s, has become an indispensable information-gathering tool for marketers in the ever more challenging, premillennial marketplace. Today's savvy consumers are busier, better informed, and much less homogeneous than in the past. More than three quarters of large companies rely on in-house departments, made up of anywhere from one to several dozen researchers, to define the size and scope of potential markets and to figure out how best to take advantage of them. The remaining 25 percent or so must go to outside marketing research companies, of which there are three types: (1) syndicated service companies that collect and sell periodic consumer and trade information, (2) customer research companies that design and execute specific research project, and (3) specialized marketing and research firms that offer a specific services, such as facilitators for focus group interviews , to other research firms and departments.     Whereas traditional research companies came under fire in the past for using unscientific methods, shading results in favor of clients, and designing loaded questions, today's high-tech, single-source research is revolutionizing the field. This method, pioneered by Information Resources, Inc., combines consumer characteristics with scanner data that accurately measure in-store buying behavior to more precisely define target markets .     Here's how it works: Researchers put together panels of consumers in representative towns across the country. Each panel member gets a magnetic card to present at the supermarket checkout counter; the card records the items that the particular consumer bought. Each panel member also fills out an extensive questionnaire on demographics, media behavior, lifestyle, and attitudes. Marketers then build databases with the behavioral and demographic information, which they ultimately use to tailor advertising and promotions to individual and narrowly defined groups of consumers. With hundreds of cable television channels available, as well as special interest publications, direct mail, promotional newsletters, and myriad other communication methods, these finely tuned marketing efforts can be delivered directly to the desired markets.     But it's not just supermarkets that are building databases. A survey by Business Week showed that 56 percent of the manufacturers and retailers polled were using some means--scanners, telephone surveys, warranty cards, fill-in coupons, and so forth--to build databases on their customers. As the numbers continue to grow, scenarios like the following will be commonplace. EXAMPLE: A gambler enters her favorite casino and presents her VIP guest card to the greeter. While she enjoys a VIP-style welcome, her card is put through a scanner that records the date and time of the visit. Thoughout the night as the gambler uses her card, the casino is automatically compiling a record of which games are played, how much is spent, how much is won and lost, and other data. The VIP card entitles the casino guest to free meals, coupons, and a line of credit. In exchange, the casino gets valuable information about how its products and services are used. The research is fast and unobtrusive, but, more important, it's accurate (Bush 1995).     See also primary data; secondary data. (Continues...) Copyright (c) 1998 Wordworks, Inc.. All rights reserved.

Table of Contents

An A-TO-Z Reference Of Essential Business Topics
Sources Of Business Information
General Business Sources
Accounting and Financial Reporting
Business Plans
Competitor Intelligence
Computers and Information Technology
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