Chapter3marketingmanagementv2 181118000703

Chapter 3
TABLE OF CONTENTS
• Summary
• Components of a Modern Marketing Information System
• Internal Records
• Marketing Intelligence
• Analyzing the Macroenvironment
• Forecasting and Demand Measurement
• The Scope Of Marketing Research
• The Marketing Research Process
• Measuring Marketing Productivity
SUMMARY
3
SUMMARY
• To carry out their analysis, planning, implementation, and control
responsibilities, marketing managers need a marketing information
system (MIS) to assess information needs, develop the needed
information, and distribute it in a timely manner.
• An MIS has three components:
• (a) an internal records system, which includes information about the
order-to-payment cycle and sales information systems;
• (b) a marketing intelligence system, a set of procedures to obtain
everyday information about the marketing environment; and
• (c) a marketing research system that allows for the systematic design,
collection, analysis, and reporting of data and findings relevant to a
specific marketing situation.
• Marketers find many opportunities by identifying trends (directions
or sequences of events that have some momentum and durability)
and megatrends (major social, economic, political, and technological
changes that have long-lasting influence).
SUMMARY
• Within the rapidly changing global picture, marketers must monitor
six major environmental forces: demographic, economic, social-
cultural, natural, technological, and political-legal.
• In the demographic environment, marketers must be aware of
worldwide population growth; changing mixes of age, ethnic
composition, and educational levels; the rise of nontraditional
families; and large geographic shifts in population.
• In the economic arena, marketers need to focus on income
distribution and levels of savings, debt, and credit availability.
• In the social-cultural arena, marketers must understand people’s
views of themselves, others, organizations, society, nature, and the
universe. Their products must correspond to society’s core and
secondary values and address the needs of different subcultures
within a society
SUMMARY
• Acknowledging the public’s increased concern about the health of
the natural environment, marketers are embracing sustainability and
green marketing programs.
• In the technological arena, marketers should take account of the
accelerating pace of technological change, opportunities for
innovation, varying R&D budgets, and the increased governmental
regulation brought about by technological change.
• In the political-legal environment, marketers must work within the
many laws regulating business practices and with various special-
interest groups.
• To estimate current demand, companies attempt to determine total
market potential, area market potential, industry sales, and market
share. To estimate future demand, companies survey buyers’
intentions, solicit their sales force’s input, gather expert opinions,
analyze past sales, or engage in market testing. Mathematical
models, advanced statistical techniques, and computerized data
collection procedures are essential to all types of demand and sales
forecasting.
SUMMARY
• Companies can conduct their own marketing research or hire other
companies to do it for them. Some of ways companies can creatively
and affordably conduct research include: engage students or
professors to design and carry out projects; use the Internet; check
out rivals; tap into marketing partner expertise; and tap into
employee creativity and wisdom.tap into employee creativity and
wisodm
• Good marketing research is characterized by the scientific method,
creativity, multiple research methods, accurate model building, cost-
benefit analysis, healthy skepticism, and an ethical focus. The
marketing research process consists of defining the problem,
decision alternatives, and research objectives; developing the
research plan; collecting the information; analyzing the information;
presenting the findings to management; and making the decision
SUMMARY
• In conducting research, firms must decide whether to collect their
own data or use data that already exist. They must also choose a
research approach (observational, focus group, survey, behavioral
data, or experimental) and research instruments (questionnaire,
qualitative measures, or technological devices). In addition, they
must decide on a sampling plan and contact methods (by mail, by
phone, in person, or online).
• Two complementary approaches to measuring marketing
productivity are: (1) marketing metrics to assess marketing effects
and (2) marketing-mix modeling to estimate causal relationships and
measure how marketing activity affects outcomes. Marketing
dashboards are a structured way to disseminate the insights gleaned
from these two approaches within the organization.
SUMMARY
• Assessing the ROI of social media is challenging but requires a range
of short-term and long-term financial and brand-related measures.
Although Facebook “likes” and Twitter tweets provide some sense of
the engagement for a brand, a more complete set of measures is
typically needed to get a more accurate picture of social media or
other online activities.
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
• What are the components of a modern marketing information
system?
• What are useful internal records for such a system?
• What makes up a marketing intelligence system?
• What are some influential macroeconomic developments?
• How can companies accurately measure and forecast
demand?
• What constitutes good marketing research?
• What are the best metrics for measuring marketing
productivity?
• How can marketers access their return on investment of
marketing expenditures?
Section 1
COMPONENTS OF A MODERN
MARKETING INFORMATION SYSTEM
COMPONENTS OF A MODERN MARKETING
INFORMATION SYSTEM
Marketers Responsibility
• Marketers are responsible for
identifying significant
marketplace changes
• Marketers are in position
Competitors
to collect information from
• customers, Other External
Customer Groups or
• competitors, and Factors
• other external factors/group
• Some companies have Source of
Information
marketing information
system that provide details
on buyer wants,
preferences and behavior
INFORMATION SYSTEM
Marketing Information System
• What is a marketing
information system?
• A marketing information
system consists of people,
Equipment
equipment, and
procedures to gather, sort,
analyze, evaluate, and People Procedures
distribute information that
Component
is needed, timely and of a
Marketing
accurate. Information
System
INFORMATION SYSTEM
Marketing Information System
• Three major sources of
Marketing Information
• Internal company records
• Marketing intelligence Marketing
intelligence
activities activities
• Marketing research Internal
Marketing
company
research
records
Sources of
Marketing
Information
Section 2
INTERNAL RECORDS
INTERNAL RECORDS
• Internal reports of
orders, sales, prices, Order-to-
costs, inventory levels, payment Cycle
receivables and payables
• Key Components
• Order-to-payment Cycle Sales
• Sales Information Systems Information
• Database Systems
Database
INTERNAL RECORDS
• The order-to-payment
cycle entails the process Order-to-
that orders go through payment Cycle
once they are received
by the company. Includes
invoices and shipping Sales
documents. Customers Information
prefer firms that can get Systems
orders processed quickly
and accurately.
Database
INTERNAL RECORDS
• Sales information
systems provide Order-to-
managers with up-to- payment Cycle
date information on the
current sales of
individual products. Sales
Information
Systems
Database
INTERNAL RECORDS
• Databases store and

organize information Order-to-
that can be retrieved payment Cycle
based on a number of
criteria such as purchase
history, product Sales
preferences, and can Information
even contain Systems
demographic and
psychographic
information on Database
customers.
Section 3
MARKETING INTELLIGENCE
What is Marketing Intelligence System?
• A marketing intelligence system is a set of procedures and sources

that managers use to obtain everyday information about
developments in the marketing environment.
What is Marketing Intelligence System?
• It reports “happenings”
data from books,
newspapers, trade Meeting
publications; customers, customers,
suppliers,
distributors, and
suppliers, distributors, Books,
managers;
and managers; and social newspapers,

trade
Social media
monitoring
publications;
media monitoring.
• Marketing intelligence Source of
Happening
gathering must be legal Data
and ethical
Improving Market Intelligence
• Companies can improve Train and motivate the

Motivate distributors,
retailers, and other
sales force to spot and
marketing intelligence report new
intermediaries to pass
along important
through the methods listed developments.
intelligence.
on the slide as well as through
channel members,
Hire external experts to Network internally and
government data sources, and collect intelligence. externally.
the purchase of information
through secondary data
sources. Set up a customer
Take advantage of
• Eight actions to improve the advisory panel.
government-related
data resources.
quantity and quality of its
marketing intelligence
Purchase information Collect marketing
from outside research intelligence on the
firms and vendors. Internet
Marketing Intelligence & the Internet
• Five Sources of Intelligence

on the Internet
Independent
Distributor or sales
customer goods
agent feedback
and service review
sites
forums
Combo sites
offering customer Customer
reviews and expert complaint sites
opinions
Public blogs
Using Marketing Intelligence
Communicating and Acting

on Marketing Intelligence:
• Competitive intelligence
works best when it is
closely coordinated with
decision-making process Marketing
Coordinated
with Decision
Intelligence
Making
Video Time – “How stores track your shopping behavior”
 “Why are companies so intent
on using technology to track
our behavior? Our actions
reveal what we desire, how
we shop, and why we buy.”
• Prof. Dr. Raymond R. Burke
• Raymond R. Burke (Bloomington,
IN USA) is the E.W. Kelley
Professor of Business
Administration at Indiana
University’s Kelley School of
Business, and founding director of
the School’s Customer Interface
Laboratory, a state-of-the-art
facility for investigating how
customers interact with new retail
environments and technologies.
Section 4
ANALYZING THE MACROENVIRONMENT
• Where the
microenvironment
refers to those
elements closest to the
company, customers,
competitors, suppliers, Can But
etc., impact a cannot be
• The microenvironment company controlled
refers to those
elements that can
impact a company, but
cannot be controlled.
• These include things

such:
Demographic Economic
Socio-cultural Natural
Technological Political-legal
Need and Trends
• Analyze the A fad is an unpredictable, short-

macroenvironment with lived, and without social, economic
and political significance
intention to find and create
new solutions to similarly
unmet needs. Some
A trend is more predictable and
become fad, trend or durable than a fad; trends reveal
megatrend. the shape of the future and can
provide strategic direction
A megatrend is a large social,

economic, political and
technological change that is slow to
form and, once in place, influences
us for some time
Need and Trends
Megatrend
Electric Automobiles
Fad
Wham-0 sold 25 million
Hula Hoops in its first 4
months. Pet rocks were
launched in the mid-
1970’s and sold 1 million
units in a matter of months.
Five month’s later sales
were almost non-existent.
Trend
Diet and Exercise
Identifying the Major Forces
• These include things

such:
Demographic Economic
Socio-cultural Natural
Technological Political-legal
The Demographic Environment

• Worldwide population growth
• 6.8 billion in 2010; will grow to 9 billion in 2040
• Population age mix
• Mexico young population; Italy old
• By 2011 in the US, those 65 and older will grow faster than the entire US population.
• Ethnic and other markets
• 25 million people in the US were born in another country
• Hispanic’s accounted for 11 percent of the US population in the 2000 census. By 2020
Hispanics are expected to account for 18.9 percent of the population.
• Educational Groups
• Illiterates
• High school dropouts
• High school diplomas
• College degrees
• Professional degrees
• Household patterns
• 20% of households “Married with Children”;
• 27% single live-alones;
• Single-parent families (8%); living with nonrelatives only (5%); and other family structures
(8%)
THE WORLD AS A VILLAGE
• If the world were a village of 100 people:
• 61 – Asian (20 Chinese, 17 Indian)
• 18 – Unable to read (33 have cell phones)
• 18 – Under 10 years of age (11 over 60 years old)
• 18 – Cars in the village
• 63 – Inadequate sanitation
• 67 – Non-Christian
• 30 – Unemployed or underemployed
• 53 – Live on less than $2 a day
• 26 – Smoke
• 14 – Obese
• 01 – Have AIDS
Source: David J. Smith and Shelagh Armstrong, If the World Were a Village: A
Book About the World’s People, 2nd ed. (Tonawanda, NY: Kids Can Press,
2002)
The Economic Environment

• Purchasing power: is the amount of goods/services one unit of currency will
purchase.
• Purchasing power is determined by income, prices, savings, credit availability, and
debt.
• Consumers have been shaken by the recession, have more debt and less savings, and
feel it will change their behavior, to be more risk averse, going forward
• The income distribution of a country can influence the decision to enter a specific
market.
• Subsistence economies
• Raw-material-exporting economies
• Industrializing economies
• Industrial economies
• Five income-distribution patterns
• Very low incomes
• Mostly low incomes
• Very low, very high incomes
• Low, medium, high incomes
• Mostly medium incomes
Sociocultural Environment
• The Sociocultural Ourselves
Environment impacts
consumption trends and
Nature Others
behavior, including: views
of ourselves, others, Sociocultural
organizations, society, Environment
nature and of the universe.
Society Universe
Organizations
Sociocultural Environment
• Core Cultural Values
• Core beliefs and values are passed from parents to
children and reinforced by social institutions
• Secondary beliefs and values are more open to change
• Subcultures are groups with shared values, beliefs,
preferences and behaviors emerging from their special
life experiences or circumstances
• Examples of subcultures include: Gothic, Metalhead,
punk, Trekkies, biker, etc.
The Natural Environment

• Companies must be cognizant of the effects of their business
on the environment and how regulations can influence its
competitive position.
• Changes in regulations can also provide opportunities for
companies, but these opportunities may only be recognized if
the company includes this aspect into their strategic planning.
The Technological Environment

• Innovation’s long-run consequences are not fully foreseeable
• Trends include:
• Accelerating pace of change
• Unlimited opportunities for innovation
• Varying R&D budgets
• Increased regulation of technological change
The Political-Legal Environment

• Laws, government agencies and pressure groups that influence
organizations and individuals create business opportunities or
uncertainty/confusion
• Two major trends:
• Increased business legislation
• Growth of special interest groups (including the consumerist
movement)
• The personal data economy worries consumers
• Opportunities can arise due to changes in the political-legal
environment. But so too can threats.
Video Time – “Gartner Top 10 Strategic Technology
Trends 2019”
 “Blockchain, artificial
intelligence, empowered
edge, privacy and ethics,
quantum computing,
immersive experiences,
augmented analytics,
autonomous things and
digital twins drive the Gartner
Top 10 Strategic Technology
Trends for 2019.”
 David Cearley
 Gartner Vice President, presented
the trends at Gartner 2018
Symposium/ITxpo in Orlando,
Florida.
Section 5
FORECASTING AND DEMAND
MEASUREMENT
MEASUREMENT
• Understanding a market
potential involves more than
just research and analysis.
• Companies must also Market
Size
determine
• market size,
• growth, and
• profit potential
Forecast
Profit Growth
Potential Size
MEASUREMENT
• Sales forecasts are used by finance to raise cash for
investment and operations,
by manufacturing to
establish capacity and
output,
by purchasing to acquire the
right amount of supplies,
by human resources to hire

the needed workers
FORECASTING AND DEMAND MEASUREMENT
Measures of Market Demand
Potential market: sufficient interest

in market offer (becomes a market if
sufficient income and access)
Potential Market
Available market: interest, income
and access to a particular offer Available Market
Target Market
Qualified available market: interest,
Penetrated Market
income, access and qualifications for
the market offer
Target market: part of the qualified

available market the company
decides to pursue
Penetrated market: set of consumers

who are buying the company’s
product
Vocabulary for Demand Measurement
Market Demand
Company Demand
Vocabulary for Demand Measurement
• Market demand is not fixed as it can change based on a number of

variables.
• If firms in an industry increase marketing expenditures, reduce (or
raise) prices, then demand can increase (or fall).
• The financial environment (shown below) also influences overall
market demand.
Estimating Current Demand
• Total market potential is the maximum sales available to all

firms in an industry during a given period, under a given level
of industry marketing effort, and environmental conditions.
• Common way to estimate is to multiply potential buyers by the average
quantity each purchases and then by the price
• The most difficult component to estimate is number of buyers
Total market potential

Average
Potential Average
X purchase X
Buyers price
quantity
• Area market potential is the sales potential for a specific

territory.
• Market-buildup Method looks to identify all potential
buyers in a market and estimating their potential
purchases.
• Market-factor Index Method – seeks to determine market
potential based on proxy information. For example, if
Virginia represents 2.55% of the US population, then the
state may produce 2.55% of all US sales.
• Industry sales and market shares means finding out
competitors and estimating their sales/evaluating
performance against the industry’s
• The macroeconomic forecast

projects
• inflation Inflation
• Unemployment Other Variables

Unemployment
(Forecasts GDP)
• interest rates
• consumer spending
• business investment
Net Exports Interest Rates
• government expenditures
• net exports
• other variables (forecasts Government Consumer
GDP) Expenditures Spending
• They either buy forecasts Business

Investment
from someone else or build
own forecast
• They build a forecast on

what people say, what
Survey of
people do, or what buyers’
intentions
people have done
• Survey of buyers’ Market-test Ask the sales
method force
intentions
• Ask the sales force
• Expert opinion
• Past sales analysis Past sales
analysis
Expert
opinion
• Market-test method
Section 6
THE SCOPE OF MARKETING RESEARCH
What is Marketing Research
• Marketing research is the function that links the

consumer, customer, and public to the marketer
through information
• The information is used to identify and define
marketing opportunities and problems; generate,
refine and evaluate marketing actions; monitor
marketing performance; and improve understanding
of marketing as a process.
• Marketing research specifies the information required
to address these issues, designs the method for
collecting information, manages and implements the
data collection process, analyzes the results, and
communicates the findings and their implications.
What is Marketing Research
Market Research
Insight
Importance of Marketing Insights
• Marketing insights provide diagnostic information about

• how consumers and markets behave,
• why we observe certain effects in the marketplace and
• what that means to marketers
• Marketing insights can form the basis for successful
marketing programs, and gaining insights is crucial for
marketing success
Who Does Marketing Research?
• Most large companies have their own marketing research

departments, which often play crucial roles within the organization.
• Smaller companies use everyone to carry out marketing research,
including customers, and they hire research firms or use affordable
methods like:
• Engaging students or professors to design and carry out projects
• Using the Internet
• Checking out rivals
• Tapping into marketing partner expertise
• Tapping into employee creativity and wisdom
Section 7
THE MARKETING RESEARCH PROCESS
Step 1: Define the
Problem, the
• Step 1: Define the Problem, Decision Step 2: Develop the
the Decision Alternatives, and Alternatives, and Research Plan
the Research
the Research Objectives Objectives
• Step 2: Develop the Research
Plan
• Step 3: Collect the
Information Step 4: Analyze the Step 3: Collect the
Information Information
• Step 4: Analyze the
Information
• Step 5: Present the Findings
• Step 6: Make the Decision
Step 5: Present the Step 6: Make the
Findings Decision
Step 1: Define the Problem, the Decision Alternatives, and the
Research Objectives
• Do not define the problem too broadly or too narrowly.
Trying to find out everything about first-class travellers
needs is too broad, while trying to determine if enough
passengers will pay $25 on a direct flight between
Chicago and Tokyo to break even is too narrow.
• Some research is exploratory – the goal is to identify the
problem and to suggest possible solutions
• Some research is descriptive – it seeks to quantify
demand
• Some research is causal – it tests a cause-and-effect
relationship
Step 2: Develop the Research Plan
• Develop the most efficient plan for gathering needed

information
• Discover what it will cost to execute the plan
• Consider data sources
• Secondary data – collected for another purpose; already exists
• Primary data – freshly gathered for a specific purpose or project
• Consider research approaches

• Observational research
• Ethnographic research
• Focus group research
• Survey research
• Behavioral research
Step 2: Develop the Research Plan – Choose Research
Instruments
• Questionnaires • Qualitative measures
• Closed-end questions specify all • ZMET
possible answers • Projective techniques
• Dichotomous • Visualization
• Multiple choice • Brand personification
• Likert • Laddering
• Semantic differential • Technological devices
• Importance scale • Galvanometers
• Rating scale • Tachistoscopes
• Intention-to-buy scale • Eye tracking
• Open-end questions allow • Skin sensors
respondents to answer in their • Brain wave scanners
own words
• Full-body scanners
• Completely unstructured
• EEG
• Word association
• fMRI
• Sentence completion
• Audiometers
• Story completion
• GPS
• Picture
Choose a sampling plan Choose a contact method

• Sampling unit: whom should we • Mail contacts
survey? • Telephone contacts
• Sample size: How many people • Personal contacts
should we survey? • Online contacts
• Sampling procedure: How should
we choose the respondents?
Step 3: Collect the Information
• Most expensive and error-prone phase

• Need to achieve consistency is one of the biggest obstacles
Step 4: Analyze the Information
• Extract findings by tabulating the data and developing

summary measures
• Test hypotheses and theories, applying sensitivity analysis to
test assumptions/strength of conclusions
Step 5: Present the Findings
• Transform raw data into insight

• Present information in clear and compelling fashion
Step 6: Make the Decision
• Research should guide decisions, not be used to support

decisions already made.
Step 6: Make the Decision
Research Decisions
Characteristics of Good marketing research
1. Uses the principles of the scientific method

2. Is creative
3. Does not rely on one method; uses two or three to
increase confidence in the results
4. Recognizes that data are interpreted from
underlying models that guide information sought
5. Balances cost and value of information
6. Avoids glib assumptions/has a healthy skepticism
7. Is Ethical
Video Time – “The Importance Of Market Research”
 With the failure rate of

small businesses in
South Africa dismally
high, Finweek,
CNBCAfrica thought it
would be interesting to
ask the experts just
how important it is to
do thorough market
research before
embarking on a new
venture or launching a
new product.
Section 8
MEASURING MARKETING PRODUCTIVITY
• A survey of CMO’s Tools to Measure

found that 80% were Productivity
dissatisfied with their
ability to benchmark • Marketing Metrics
their marketing • Marketing Mix
programs business Modeling
impact and value.
• Marketing Dashboard
Marketing metrics assess marketing effects
• Marketing Metrics help Example of Marketing Metrics
• Web site analytics
marketers quantify, • Social media presence
compare and interpret • Permission marketing statistics
performance • Short-term financial benefits
• Short-term overall digital benefits
• Marketers choose one or • Long-term brand lift
more measures based on • Long-term risk avoidance
the issues they face • Sales turnover
• Shareholder value
• Customer awareness, attitudes and
behaviors
• Market share
• Relative price premium
• Number of complaints
• Distribution and availability
• Total number of customers
• Perceived quality
• Loyalty and retention
Quantify
Marketing
Compare Performance
Interpret
• Internal metrics can include: • External Metrics

• employees awareness of • Awareness
goals; • Market share
• resource adequacy or • Relative price
autonomy. • Number of complaints
• Consumer satisfaction
• Total number of customers
• Perceived quality/esteem
• Loyalty/retention
• Relative perceived quality
Video Time – “Marketing Metrics that Matter”
 “How do you measure your
marketing efforts? Liz Harr
breaks down what metrics
you should track into these
three categories.”
• Elizabeth (Liz) Harr

• Elizabeth (Liz) Harr, a
nationally recognized expert
in high-growth marketing,
leads Hinge’s Technology and
Consulting practices..
Marketing-mix modeling
• Marketing-mix modeling estimates causal relationships and

measure how marketing activity affects outcomes
• Data analyzed from sources like retailer scanner data, company
shipment data, pricing, media and promotion spending data
• Understand/isolate effects of marketing activities and allocate or
reallocate expenditures
Marketing-mix modeling
• The results of marketing-mix

modeling helps guide
allocation on marketing
budgets. Awareness
• With the right models,
marketers can determine how
each marketing element
(sales promotions, Expenditure
advertising, trade
promotions, etc) impact
product revenue.
Marketing Dashboard
• Marketing dashboards are a structured way to

disseminate insights gleaned from marketing metrics and
marketing-mix modeling.
• Dashboards are similar to the instrument panel of an airplane.
They can be designed to provide information in real-time that
managers can use to better understand the market.
• Summarize relevant internal and external measures for synthesis
and interpretation
• Only as good as the information on which they are based
Video Time – “Marketing Dashboard”
 An example of how a
marketing dashboard looks
like.

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Chapter 3

• Databases store and

• A marketing intelligence system is a set of procedures and sources

and managers; and social newspapers,

• Companies can improve Train and motivate the

• Five Sources of Intelligence

Communicating and Acting

• These include things

• Analyze the A fad is an unpredictable, short-

A megatrend is a large social,

• These include things

The Demographic Environment

The Economic Environment

The Natural Environment

The Technological Environment

The Political-Legal Environment

by human resources to hire

Potential market: sufficient interest

Target market: part of the qualified

Penetrated market: set of consumers

• Market demand is not fixed as it can change based on a number of

• Total market potential is the maximum sales available to all

Total market potential

• Area market potential is the sales potential for a specific

• The macroeconomic forecast

• Unemployment Other Variables

• They either buy forecasts Business

• They build a forecast on

• Marketing research is the function that links the

• Marketing insights provide diagnostic information about

• Most large companies have their own marketing research

• Develop the most efficient plan for gathering needed

• Consider research approaches

Choose a sampling plan Choose a contact method

• Most expensive and error-prone phase

• Extract findings by tabulating the data and developing

• Transform raw data into insight

• Research should guide decisions, not be used to support

1. Uses the principles of the scientific method

 With the failure rate of

• A survey of CMO’s Tools to Measure

• Internal metrics can include: • External Metrics

• Elizabeth (Liz) Harr

• Marketing-mix modeling estimates causal relationships and

• The results of marketing-mix

• Marketing dashboards are a structured way to

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