Business Statistics (SM60.

12) Group Case Assignment

Case Study: HBAT Industries1

Background
HBAT industries (HBAT), is a premium manufacturer of paper products in U.S. Its paper
products are used widely in the newsprint industry and the magazine industry both inside
and outside of North America. It is a well established company with a fully developed
Marketing unit. The company either uses it distribution channels or brokers channel to
supply the paper products to the customer. But due to the changing customer perceptions
and relationships, the company is facing challenges by newer companies. HBAT
management is concerned and wants to change their marketing strategy for the next year
to regain its market share. HBAT wants to identify and position itself accordingly to the
characteristics of its customers and the relationships between their perceptions of HBAT,
and their actions towards HBAT (e.g., satisfaction and likelihood to recommend).

To help HBAT marketing unit, the management has hired Crimson Consulting Co.
(Crimson). Crimson Consulting Co., is an established marketing research company. It has
one of the well established lead-user groups. Crimson collected part of the data set
through online surveys of HBAT customers completed on a secure website. Crimson
contacts purchasing managers and encourages them to participate. To do so, managers
log to the web and finish the survey. The survey data are supplemented by other
information compiled and stored in HBAT’s data warehouse and accessible through its
decision support system.

Database
The database, consisting of 100 observations on 18 separate variables, is based on a
market segmentation study of HBAT customers. As you already know, HBAT sells paper
products to two market segments: the newsprint industry and the magazine industry. The
paper products are sold to these market segments either directly to the customer, or
indirectly through broker.

Two types of information were collected in the surveys. The first type of information was
perceptions of HBAT’s performance on 13 attributes. These attributes, developed through
focus groups, a pretest, and variables used in previous studies, are considered to be the
most influential in the selection of suppliers in the paper industry. Respondents included
purchasing managers of firms buying from HBAT, and they rated HBAT on each of the
13 attributes using a 0-10 scale, with 10 being “Excellent” and 0 being “Poor”. The
second type of information relates to purchase outcomes and business relationships (e.g.,
satisfaction with HBAT and whether the firm would consider a strategic alliance /
partnership with HBAT).

A third type of information is available from HBAT’s data warehouse and includes
information such as size of customer and length of purchase relationship.
1
Adapted from J. F. Hair Jr. et al., Multivariate Data Analysis, 6th ed., Pearson, New Jersey (2006).
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Business Statistics (SM60.12) Group Case Assignment

Data information and description

Brief descriptions of the database variables are provided in Table 1-1, in which the
variables are classified as either independent or dependent, and either metric or non-
metric. A definition of each variable and an explanation of its coding are provided in the
following sections.

TABLE 1-1 Description of Database variables

Variable Description Variable Type
Data Warehouse Classification Variables
X1 Customer Type Non-metric
X2 Industry Type Non-metric
X3 Firm Size Non-metric
X4 Region Non-metric
X5 Distribution System Non-metric

Performance Perceptions Variables

X6 Product Quality metric
X7 E-Commerce Activities/Website metric
X8 Technical Support metric
X9 Complaint Resolution metric
X10 Advertising metric
X11 Product Line metric
X12 Sales Force Image metric
X13 Competitive Pricing metric
X14 Warranty and Claims metric
X15 New Products metric
X16 Ordering and Billing metric
X17 Price Flexibility metric
X18 Delivery Speed metric

Outcome/ Relationship Measures

X19 Satisfaction metric
X20 Likelihood of Recommendation metric
X21 Likelihood of Future Purchase metric
X22 Current Purchase/ Usage Level metric
X23 Consider Strategic Alliance/ Partnership in Future Non-metric

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Business Statistics (SM60.12) Group Case Assignment

Data Classification
Data Warehouse Classification Variables

As respondents were selected for the sample to be used by the marketing research firm,
five variables were extracted from HBAT’s data warehouse to reflect the basic firm
characteristics and their business relationship with HBAT. The five variables are as
follows:

X1 Customer Length of time a particular customer has been buying from HBAT:
Type 1= Less than one year
2= Between 1 and 5 years
3= Longer than 5 years

X2 Industry Type of industry that purchases HBAT’s paper products:

Type 0= Magazine industry
1= Newsprint industry

X3 Firm Size Employee size:

0= Small firm, fewer than 500 employees
1= Large firm, 500 or more employees

X4 Region Customer Location:

0= USA / North America
1= Outside North America

X5 Distribution How paper products are sold to customers:

System 0= Sold indirectly through a broker
1= Sold directly

Performance Perceptions Variables

Each respondent’s perceptions of HBAT on a set of business functions were measures on

a graphic rating scale, where a 10-centimeter line was drawn between the endpoints,
labeled “Poor” and “excellent”, shown here.

Poor Excellent

As part of the survey, respondents indicated their perceptions by making a mark

anywhere on the line. The location of the mark was electronically observed and the
distance from 0 (in centimeters) was recorded in the database for that particular survey.
The results were a scale ranging from 0 to 10, rounded to a single decimal place. The 13
HBAT attributes rated by each respondent were as follows:

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Business Statistics (SM60.12) Group Case Assignment

X6 Product Quality Perceived level of quality of HBAT’s paper products

X7 E-Commerce Activities / Overall image of HBAT’s Web site, especially user-
Web Site friendliness
X8 Technical Support Extent to which technical support is offered to help
solve product/service issues
X9 Complaint Resolution Extent to which any complaints are resolved in a
timely and complete manner
X10 Advertising Perceptions of HBAT’s advertising campaigns in all
types of media
X11 Product Line Depth and breath of HBAT’s product line to meet
customer needs
X12 Sales Force Image Overall image of HBAT’s sales force
X13 Competitive Pricing Extent to which HBAT offers competitive prices
X14 Warranty and Claims Extent to which HBAT stands behind its product/
service warranties and claims
X15 New Products Extent to which HBAT develops and sells new
products
X16 Ordering and Billing Perceptions that ordering and billing is handled
efficiently and correctly
X17 Price Flexibility Perceived willingness of HBAT sales reps to
negotiate price on purchases of paper products
X18 Delivery Speed Amount of time it takes to deliver the paper products
once an order has been confirmed

Outcome/ Relationship Measures

Five specific measures were obtained that reflects the outcomes of the respondent’s
purchase relationships with HBAT. These measures include the following:

X19 Customer Satisfaction Customer satisfaction with past purchases from HABT,
measured on a 10-point graphic rating scale
X20 Likelihood of Likelihood of recommending HBAT to other firms as a
Recommending HBAT supplier of paper products, measured on a 10-point
graphic rating scale
X21 Likelihood of Future Likelihood of purchasing paper products from HBAT in
Purchases from HBAT the future, measured on a 10-point graphic rating scale
X22 Percentage of Percentage of the responding firm’s paper needs
Purchases from HBAT purchased from HBAT, measured on a 100-point
percentage scale
X23 Perception of Future Extent to which the customer/ respondent perceives his
Relationship with or her firm would engage in strategic alliance /
HBAT partnership with HBAT:
0= Would not consider
1= Yes, would consider strategic alliance or partnership

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Business Statistics (SM60.12) Group Case Assignment

The data set is given in excel file: “HBAT Case Data.xls”.

Assignment Procedure
The case and its data provide input for a series of group assignments to be given at each
lesson of the class.

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