Saturday, June 27, 2009

Assessing the Impact of a Sexual Harassment Lawsuit at a Metropolitan Restuarant

A popular metropolitan restaurant recently suffered the negative publicity of a sexual harassment lawsuit. The courts settled the suit in favor of the restaurant, but an interesting question is how would we measure the damage to the restaurants brand equity. Since I had our mandatory Fair Employment Practices training this week, it's an apropos topic.

Exploratory Research

Harris and Smith (2002, p. C1) define a crisis as any newsworthy event that has happened or will happen in the near future that has the potential for adverse publicity. The sexual harassment event associated with the Restaurant X satisfies their definition of a crisis. In his section on public relations, Duncan (2005, p. 563) says that this type of incident should be treated as a crisis because of the extreme impact it poses to Restaurant X’s “reputation and brand relationships.”

Lichtenstein, et al (2004, p. 29) reinforce Duncan’s premise by noting that corporate social responsibility strengthens brand equity and say its impact goes beyond sales. This means that a consumer perception of Restaurant X as an environment that condones sexual harassment will have a negative effect not only on sales. A reduction of brand equity will also result and with it there will be a consequent loss of owner equity. It is vitally important for Restaurant X to verify through marketing research the attitudes its publics harbor about the incident.

What type of survey research should be initiated

Management should already understand that negative publicity in general affects customer retention. They will want to know if their specific sexual harassment publicity is reducing their customer retention and sales. The goal of this marketing research should be to “shed light on [this specific] association or relationship,” which is how McDaniel and Gates (2008, p. 49) characterize a descriptive research design.

The basic method of research should be survey. McDaniel and Gates (p. 50) inform us that experiments are typically used only for causal research designs. Observation would be an inefficient approach to determine opinions and attitudes on the restaurant’s sexual harassment case because there is no direct interaction with the customer. Surveys are “an orderly and structured approach” to understand “opinions and attitudes.”

This research should be quantitative. Qualitative research is “not necessarily representative of the population of interest,” (see McDaniel and Gates, 2008, p. 110). Surveys are a good tool to find out what factors influence consumers (p. 142); in this case, did the publicity influence customer retention and sales. Of the various types of surveys, I recommend Computer-Assisted Telephone Interviews (CATI).


In this situation there is a tradeoff between turnaround speed, measurement error, and cost. CATI is the optimal strategy, with Internet Panels a close second. Johnson (2009, p. 2) notes that non-response bias is a significant source of measurement error. He also informs us that both telephone and mail surveys are subject to increasing non-response rates.

Thee (2007, p. 1) reports another problem with telephone surveys for the restaurant: because of the substantial use of cell phones, telephone sampling frames are no longer geographically based. On the other hand, the restaurant public is geographically bound. Thee goes on to say that households with only a cell phone numbered 16% in 2007 (p. 1) and this could grow to 25% by the end of 2008.

CATI can help here. McDaniel and Gates (p. 152) inform us that the computer can customize each questionnaire according to how the respondent answers previous questions. We could ask if they are currently in the metro area. If not and they have no intention of visiting the metro area, then we could close the interview.

McDaniel and Gates (p. 365) also report on a method for determining the extent of nonresponse bias. They cite two studies that suggest nonrespondents are not a clearly distinct subgroup from the general population. To find out for certain in this case, only a very small follow-up survey using nonrespondents as the sampling frame need be conducted.

Johnson (2009, p. 1) informs us that restaurants make frequent use of self-administered surveys. The reason they are not the best solution in this case, is that customers already lost to Restaurant X because of the lawsuit won’t be patronizing the restaurant anymore. In addition, a self-administered survey approach will not have the same quick turnaround as online techniques (see Johnson, 2009, p. 2).

Interviews such as door-to-door and executive would have little traction with the immediate needs of the restaurant. Mall intercept interviews would be too expensive, and in addition, McDaniel and Gates (2008, p. 172) say to avoid such an approach when the incidence rate is low because it will be too expensive. The number of patrons of Restaurant X is low compared to the total population in the metropolitan area.

Internet Panels have been used in other crisis management situations. Duncan (2005, p. 564) reports that McDonald’s setup a panel to protect its reputation from the fallout over a fraud perpetrated in its promotional games. McDaniel and Gates (p. 156) also discuss the advantages of panels. Johnson (p. 2) informs us that “companies like Survey Sampling” provide consulting expertise to “construct a sample to match the target population” and then rent a panel from their large database. Still, as Johnson (p. 2) observes “The internet population is not representative of the population as a whole,” and “Internet users are concerned with privacy and, thus, may refuse the survey.”

What topics should the survey cover?

First up is demographics such as gender, age, and race. The next topic would investigate level of awareness. It would be used to discover the news sources that informed the respondent about the lawsuit, as well as their knowledge about the particulars of the case, and knowledge about Restaurant X policies and training to prevent sexual harassment.

The third topic would be to determine their opinion about how Restaurant X handled the sexual harassment accusation. Duncan (2005, p. 563) says that for such a crisis it is a good idea to survey opinion about the company’s level of honesty, helpfulness, speed of response, clarity, and consistency of message.

The fourth topic would be to find out from patrons about their experience with the restaurant. Have they ever witnessed sexually harassing behavior at the restaurant? Has the staff been professional and courteous? The fifth topic would be to establish the factors that influence Restaurant X patron decisions to frequent a restaurant. An important aspect here is how did the sexual harassment lawsuit affect their opinion about Restaurant X and their willingness to be a customer? The sixth topic would be open-ended questions to find out their opinions about what further steps Restaurant X should take.

The survey population

The population is the existing, lost and potential customers of Restaurant X in the metropolitan area. With no further information from the restuarant advertising or news stories, I will assume that the entire metropolitan area should be viewed as potential customers. To focus only on existing customers would not discover the opinions of lost customers. Additionally it would exclude the only source of growth, new customers.

The sampling units and sampling frame

The sampling unit would be households because people tend to go to restaurants as a family or as a couple and not alone. The sampling frame should not be the telephone directory for the metropolitan area. McDaniel and Gates (pp 333-4) list the problems with the telephone directory including problems with unlisted numbers and their prevalence among non-whites and younger people. Instead random-digit dialing from phone exchanges in the metropolitan area will form our sampling frame.

Simple random sampling will be used to create our random-digit dialing frame. Johnson (2009, p. 3) notes that probability sampling, like simple random, gives the researcher a representative sample of the population. Specifically for simple random sampling, a computer can randomly select the sample and this is consistent with the CATI approach I recommend.

The sample size

The main difference between qualitative and quantitative research is sample size (see McDaniel and Gates, 2009, p.108). Managers are more “comfortable with marketing research based on large samples and high levels of statistical significance” (p. 109). Another factor that will affect our sample size is the required confidence level. Wilson and Ogden (2004, p. 56) say that

"Survey research requires at least a 95% confidence level and a margin of error of less than 5% to be actionable.”
Do we need to know the exact population size for the metropolitan area? Using a sample size calculator it quickly becomes apparent that after a certain point increasing population size by an order of magnitude does not increase sample size requirements by more than a single person or two. Creative Research Systems (2009, p. 1) provides a Sample Size Online Calculator that I used to calculate the following sample sizes:

(The calculator is at Creative Research Systems).

Given the gravity of sexual harassment allegations and the damage to brand equity, owner equity and ongoing sales, I recommend a sample size of 384.

Creative Research Systems (2009). Sample Size Calculator. Retrieved on June 17, 2009 from

Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Harris and Smith Public Affairs (July 3, 2002). Public Relations Handbook. Retrieved on June 10, 2009 from

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 11, 2009 from

Lichtenstein, Donald R., Drumwright, Minette E. & Bridgette M. Braig (October 2004). The Effect of Corporate Social Responsibility on Customer Donations to Corporate-Supported Nonprofits. Retrieved on June 9, 2009 from

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Thee, Megan (December 7, 2007). Cellphones Challenge Poll Sampling. NY Times. Retrieved on June 10, 2009 from

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

Saturday, June 20, 2009

Measuring Attention and Packaging Design

A national cereal company has developed a new, healthy cereal for teens. Currently, the company is considering two package designs and would like to assess the effectiveness of each package design in getting the attention of teenagers.

Independent and dependent variables, treatment groups, the design and control for extraneous factors.
Percy (2008, p. 256) notes that mothers are key decision makers for family health and eating habits. Teenager awareness and acceptance, and mother acceptance will jointly determine the purchase decision. Our task is to test the effectiveness of two alternative package designs in getting teenager attention. The dependent variable is teenager attention. The independent variable is package design.

Wilson and Ogden (2004, p. 36) define an influential as an opinion leader, and observe “that people follow the advice of someone they trust and has knowledge on the subject.” We want teenagers who eat cereal but who are also influentials. They will be our subjects. This is a new product and the most important group to reach in this introductory phase is the influentials.

McDaniel and Gates (p. 114) also recommend “Influentials.” They say these people are two to five years ahead of the curve and have significant influence among their peers. They say, “Recruiting influentials is particularly useful when a marketer is trying to determine to launch a new product….” Brooks (2006, pp 31-2) agrees and further says, “A growing body of consumer research suggests the 60-second conversation is dethroning the 30-second ad.”

We will have two experimental groups and one control group. Experimental group one will view package design one. Physiological Measurements will be made to monitor their response to the package design. These measurements can show interest and arousal levels (see McDaniel and Gates, 2008, p 192). The treatment is to show them the design. Likewise for experimental group two but for package design two instead. The control group won't be shown either proposed design.

There are problems with measuring attention because it may change during the testing process and also the subjects know they are being tested for it (see Boyd and Westfall, 1964, pp 105, 111). A control group can help compensate for this. The control group will share the exact same experience as the two treatment groups, except they will not be exposed to a package design.

They will, however, be read the same statement about the new product and package designs and that they will be measured. McDaniel and Gates (p. 219) note that the control group is not subject to treatment, in this case exposure to one of the package designs. Their participation can be used to dampen extraneous factors, like the anticipation of knowing they will be measured.

Experimental design and conduct of the experiment.
The steps are

  1. Three groups of influentials will be randomly selected

  2. Physiological Measurements will be made of each group

  3. Each group will be read each the same statement about the new product

  4. For the control group, the post measurement will be taken

  5. For the two treatment groups, show each their respective packaging designs only and take measurements

The research design is a True Experiment Design (see McDaniel and Gates, 2008, p 219), the Before-and-After with control design (p. 219). The test subjects should be assigned to each group randomly to control extraneous effects. The experiment should be held in a lab for high internal validity (p. 211).

Boyd, Harper and Ralph Westfall (1964). Marketing Research Text and Cases. Richard Irwin.

Brooks, Steve (November 2006). How to Build Buzz. Restaurant Business. Retrieved on June 19, 2009 from EBSCOHOST.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Percy, Larry (2008). Strategic Integrated Marketing Communications. Butterworth-Heinemann.

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

Sunday, June 14, 2009

A New Logo for Wendy's?

Wendy’s is an international fast food chain that ranks third in hamburger joints behind McDonald’s and Burger King (Hoover’s, 2009, p 1). It has over 6,500 locations in the United States and more than 20 countries worldwide. Management is considering changing the Wendy logo and brand character to keep it current. There is a concern that changing the well-known logo could have adverse repercussions. To study consumer opinion a series of personal interviews will be conducted.

According to Keller (pp 156-159), logos and brand characters are an easily recognizable way to identify a company and product. They are central to advertising campaigns and packaging. He says they can “create perceptions of the brand as fund and interesting.” However, (p. 158) he also notes they must be changed from time to time. Betty Crocker spent over $1M to update its tired brand character (pp 164-5). This $1M price tag is also the case for updating a logo (p. 157).

Sampling Method
The background information shows the importance of correctly updating a brand character, and that an appropriate budget must be allocated to this important task. Having an accurate cross-section that is representative of Wendy’s customers outweighs cost. We do not want to draw incorrect conclusions by using a sampling method known to be inaccurate.

The life-cycle of a sampling plan is to define the population, choose a data-collection method, identify a sampling frame, select a sampling method, determine sample size, develop operational procedures, execute the plan (see McDaniel and Gates, 2008, p330). This specific assignment is to select and justify a sampling method. Our first decision is between probability samples and non-probability samples. McDaniel and Gates (p. 334) note that probability samples are better for obtaining a representative cross section of our population. Given the importance of the logo or brand character, we need to have the best representation we can get. The trade-off is cost but we should have a budget commensurate with the task.

Next, we must decide among the several probability sampling methods. I like the stratified sample because it has a smaller sampling error than the other methods (see McDaniel and Gates, 2008, p. 341). It is more efficient because it eliminates one of more sources of variation through the stratification process. The researcher is making the “sample be more representative by making sure that important dimensions of the population are represented in their true population proportion.”

Wendy's should stratify on country. According to Hawkins, et al (2007, p 40) cultural factors that like language, demographics, values and nonverbal communications can impact marketing communications. A cultural faux pas with a brand character or logo can make Wendy’s appear like confused Martians. Using country to stratify, I can also avoid the main drawback on stratified sampling – we usually don’t know in advance the proportions of the strata (see McDaniel and Gates, 2008, p. 342). However, Wendy's consolidated financial statements do have that information.

Finally, should the method be proportional allocation or disproportional allocation? In this case, the method should be proportional because it is easy to calculate the relative number of locations in each country to the total number of locations (p 342). Within each country (strata), do simple random sampling with a sample size proportional to the relative percentage for the country.

To collect the data, the store intercept survey type can be used (see McDaniel and Gates, 2008, p. 150). As a style of mall-intercept survey, it would share many of the same advantages and disadvantages. The interviewer can show proposed Wendy’s logos, explain and probe (p. 171). On the other hand, the respondent may be distracted, or in a hurry. Further, there is a greater opportunity for interviewers to select the people to interview in a non-probabilistic manner. Strict operational procedures should be defined.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Hoovers (2009). Hoover's Profile: Wendy's International, Inc. Retrieved on June 7, 2009 from

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 7, 2009 from

Keller, K (2008), Strategic Brand Management. Pearson/Prentice-Hall.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Sunday, June 7, 2009

Ruger at a Crossroads

Strategic Opportunity for Sturm Ruger Firearms
Ruger is the apex predator in the revolver market in the United States but has little presence overseas. Moreover, its domestic market share is under fire from semi-automatic handguns. It has an opportunity to expand its sales internationally through revolver sales to Europe. In Europe, countries such as Finland, Norway, Sweden, Switzerland, Serbia and the Czech Republic have gun control laws similar to the United States (see Dodds, 2007, pp 1-2 or MacInnis, 2007, pp 1-2 or Wikipedia, 2009, pp 1-5). As an example, the U.S. has 90 guns per 100 citizens and Finland has 56. In Germany, a valid firearms license is required for each firearm that is owned. Nevertheless, even Germany represents a sales opportunity.

In its 10-K Report, Sturm Ruger & Co. states (see SEC, 2008, p 4) 94% of its firearms sales are to the domestic market. Their units shipped reported in the 10-K (p. 23) are

According to Motley Fool (2007, p 1) in its analysis of Sturm Ruger and Company, the competition in the U.S. firearms industry is fierce and comes from both domestic and foreign competition. They go on to say that the handgun market has constant growth but that Ruger lags the growth. Aggressive competitors like Smith & Wesson are taking market share from Ruger. They conclude that Ruger has no “strategic initiatives that could fuel the growth prospects.”

I have used the Google Trends service ( to analyze search engine requests for the word “Ruger.” What I found was fascinating. There is a significant overseas search interest in Ruger. I contend that search interest will translate into purchase intent. This is a largely untapped market for Ruger. I then compared Ruger with Glock. Here are the results.

It is similar with the other competitors and shows a surprising interest in Ruger overseas.

In-depth Interviews
Glock, Beretta and Walther are powerful international competitors to Sturm Ruger & Co. They do not have an appealing lineup of revolvers but instead have focused their attention on the semi-automatic pistol. I need to use in-depth interviews to find out the attitudes, beliefs and feelings of European consumers about revolvers versus semi-automatic handguns. Additionally, I need to define the parameters of Ruger’s relationship with the various European gun retailers, who may be competitors with each other.

Given the prevailing preference for European semi-automatics in Europe, I believe an in-depth interview is more appropriate than a focus group to find out attitudes towards revolvers. McDaniel and Gates (p. 127) say that such interviews allow the researcher to devote more time, to more deeply delve into an area, and “ to reveal feelings and motivations that underlie statements.” We need to know if handgun consumers in Europe would consider revolvers and why. The “if” will let us know if such a campaign is feasible, and the “why” will help set marketing strategic direction.

McDaniel and Gates go on to say that in-depth interviews allow research to explore “casual and tangential remarks,” and obtain insight into the main issue. Also, new directions of inquiry can be quickly and dynamically charted. The traditional discussion guide (p.117) of the focus group limits such flexibility.

Furthermore, one segment we will be interviewing is gun retailing. Here the members are competitors to each other and McDaniel and Gates (p. 128) note that in such a circumstance interviews are a better approach. We will need to discuss inventory, advertising and distribution strategies with them that they may not want to reveal in front of competitors.

I believe qualitative research is the best first step. According to Johnson (2009, p. 1), “It [qualitative research] obtains in-depth information on motivations, feelings and behaviors.” Wilkerson (2003, p. 26) says that qualitative research such as interviews allows for “broad and open-ended questions in hopes that the author would be able to capture any significant information” not in our preconceived notion of the issue. Johnson (2009, p. 3) goes on to say that in-depth interviews can reveal detailed aspects of consumer behavior. This makes qulaitative research the best first step in a campaign to introduce modern Ruger revolvers to Europe.

Dodds, Paisley (April 17, 2007). U.S. Gun Laws Draw Heat After Massacre. AP. Retrieved on June 7, 2009 from

Johnson, E. (2009). Focus Groups & Other Qualitative Methodologies. Retrieved on June 7, 2009 from

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

MacInnis, Laurin (August 28, 2007). U.S. most armed country with 90 guns per 100 people. Reuters. Retrieved on June 7, 2009 from

SEC (2008). Sturm, Ruger Annual 10-K Report. Retrieved on June 7, from

Wikipedia (2009). Gun Politics. Retrieved on June 7, 2009 from

Wilkerson, Kristen Courtney (2003). Cyber-Campaigning for Congress: A Cultural Analysis of House Candidate Web Sites. UT Austin Dissertation.