Consumer product companies use surveys extensively. In a given year,
Campbell Soup Company questions over 100,000 consumers about foods and
uses the responses to modify and improve its product offerings and to con-
struct demand equations. Marriott Corporation used this method to design
the Courtyard by Marriott hotel chain, asking hundreds of interviewees to com-
pare features and prices. Today, the explosion of online surveys allows firms to
collect thousands of responses (often highly detailed) at very low cost.SURVEY PITFALLS Though useful, surveys have problems and limitations. For
example, market researchers may ask the right questions, but of the wrong peo-
ple. Economists call this sample bias. In some contexts, random sampling pro-
tects against sample bias. In other cases, surveys must take care in targeting a
representative sample of the relevant market segment.
A second problem is response bias. Respondents might report what they
believe the questioner wants to hear. (“Your product is terrific, and I intend to
buy it this year if at all possible.”) Alternatively, the customer may attempt to influ-
ence decision making. (“If you raise the price, I definitely will stop buying.”)
Neither response will likely reflect the potential customer’s true preferences.
A third problem is response accuracy. Even if unbiased and forthright,
a potential customer may have difficulty in answering a question accurately.
(“I think I might buy it at that price, but when push comes to shove, who
knows?”) Potential customers often have little idea of how they will react to
a price increase or to an increase in advertising. A final difficulty is cost.
Conducting extensive consumer surveys is extremely costly. As in any eco-
nomic decision, the costs of acquiring additional information must be
weighed against the benefits.^2
An alternative to consumer surveys is the use of controlled consumer
experiments. For example, consumers are given money (real or script) and
must make purchasing decisions. Researchers then vary key demand variables
(and hold others constant) to determine how the variables affect consumer
purchases. Because consumers make actual decisions (instead of simply being
asked about their preferences and behavior), their results are likely to be more
accurate than those of consumer surveys. Nonetheless, this approach shares
some of the same difficulties as surveys. Subjects know they are participating in
an experiment, and this may affect their responses. For example, they may
react to price much more in an experiment than they do in real life. In addi-
tion, controlled experiments are expensive. Consequently, they generally are
small (few subjects) and short, and this limits their accuracy. As the following
example shows, consumer surveys and experiments do not always accurately
foretell actual demand.130 Chapter 4 Estimating and Forecasting Demand(^2) The same point applies to setting the design and size of a given consumer survey. In principle, the
number of respondents should be set such that the marginal benefit from adding another respon-
dent in the sample matches its marginal cost.
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