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Philip Kotler and Gary Armstrong, in Principles of Marketing, defined marketing as "the business function that identifies customer needs and wants; determines which target markets the organization can serve best; and designs appropriate products, services, and programs to serve these markets. … The goal of marketing is to create customer satisfaction profitably by building value-laden relationships with important customers."

How Does Statistics Fit Into This Picture?

If everyone's needs, wants, desires, preferences, and expectations were the same, then marketing would be easy. The chief executive officer could simply design products to meet his or her own needs-everyone would like whatever the CEO likes.

Modern customers demand more from products and services, which must be customized to satisfy individual tastes and preferences. For example, computer buyers have different preferences for speed, memory, screen size, and multimedia options. Some customers are more sensitive to price, promotions, and advertising. Customers use different media to collect information about computers and different channels (retail stores or the Internet) to make a purchase.

Statistics is used to quantify the extent of variation in customers' needs and wants.

Following are some marketing research methods for collecting information:

  • Focus Groups - A small group of customers meets with a facilitator who leads a discussion about their needs and product features. Focus groups provide in-depth, unstructured information that is often used in designing more formal surveys or experiments.
  • Sample Surveys - Sample surveys provide a structured method for collecting customers' needs, wants, and expectations by having participants respond to a battery of items. Surveys are conducted by mail, over the phone or Internet, and at malls.
  • Designed Experiments - Subjects experience new products or services under controlled, laboratory conditions.
  • Field Experiments and Test Markets - Companies isolate a small city to test the acceptance of a new product or manipulate marketing variables, such as price or advertisements, to determine customers' response to a product and marketing effort.
  • Transaction Data - Information technology provides the ability to record information at the point of sale. This information includes not only product features but also information about the customer.

Statistical methods are a critical component to understanding your customer.