Reference no: EM132304724

William Rosenberg opened the first Dunkin Donuts in Quincy, Massachusetts, in 1950. Residents flocked to his store each morning for the coffee and fresh doughnuts. Rosenberg started franchising the Dunkin’ Donuts name and the chain grew rapidly throughout the Midwest and Southeast. By the early 1990s, however, Dunkin’ was losing breakfast sales to morning sandwiches at McDonald’s and Burger King. Starbucks and other high-end cafes began sprouting up, bringing more competition. Sales slid as the company clung to its strategy of selling sugary doughnuts by the dozen. In the mid-90s, however, Dunkin shifted its focus from doughnuts to coffee in the hope that promoting a more frequently consumed item would drive store traffic. The coffee push workeddoughnuts make up a mere 17 % of sales. Dunkin’ sells 2.7 million cups of coffee a day, nearly one billion cups a year. And, Dunkin’ sales have surged 40 % during the past four years. Based on this recent success, Dunkin’ now has ambitious plans to expand into a national coffee powerhouse, on a par with Starbucks, the nation’s largest coffee chain. Over the next few years, Dunkin’ plans to remake its more than 5,400 US shops in 34 states and grow to double that number by 2020. But Dunkin’ is not Starbucks. In fact, it does not want to be. To succeed, Dunkin must have its own clear vision of just which customers it wants to serve (target segment) and how (value proposition). Dunkin’ gut feeling is that Dunkin’ and Starbucks target very different customers, who want very different things from their favorite coffee shops. Starbucks is strongly positioned as a sort of highbrow third place – outside of home and office – featuring couches, eclectic music, wireless internet access, and art splashed walls. Dunkin’ has decidedly lowbrow, everyman kind of positioning. With its makeover, Dunkin plans to move upscale – a bit but not too far – to reposition itself as a quick but appealing alternative to specialty coffee shops and fast-food chains. Yes, Dunkin’ built itself on serving simple fare to working class customers. Inching upscale without alienating that base will prove tricky. Newly appointed Dunkin’ CMO, Tony Weisman, wants to conduct a marketing research study. They currently do not know which steps to take to come up with a clear understanding of which direction they should take. This is why approached you.

Imagine that you want to know the average income business school graduates in the US make during their first year after school. You will never be able to know the true average (unless you're able to measure several thousands of graduates). What you can do is select a representative sample and measure hundreds of people and calculate the average income. The average income among these people is probably not exactly equal to the true average but, if you did a good job (use a representative sample of the population) it should be close enough. The difference between the true average (average income all US business school graduates had during their first year) and its estimation through your sample (average income of people in your sample) is called what type of error? Please elaborate.

Local coffee store is interested in determining the demographic and psychographic characteristics of people who shop at their store versus those of people who shop at Starbucks. They also want to know what their brand perception is relative to the competition. They would like to have the information in three weeks and are working on a limited budget.

a) Which survey method(s) would you recommend? Why?

b) Based your answer in (a) what type(s) of sampling and measurement error may arise from the survey method you chose? Why?