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  • 1. Lecture 2 Gathering Information and Scanning the MarketEssential ReadingTextbook: Kotler et al. (2009), chapter 3 & 4Optional ReadingReading 2.1: Hair, J.F. Jr. (2007), Knowledge creation in marketing: The role ofpredictive analysis. European Business Review, 19(4), 303-315Objectives:At the completion of this lecture, you should be able to: • Appreciate the role of marketing research and information system in helping an organization achieve its overall marketing objectives; • Understand the importance of analysing key demographic, economic, natural, technological, political-legal and socio-cultural developments for market intelligence;CommentaryFor a market oriented organization, it is essential to have a systematic way ofgathering market information. The collection and use of this information isbecoming a critical element due to a number of trends; including globalization andthe move away from competing on price to other non-price forms of competition.Basically, the more complex and changeable the environment is, the moreimportant it is to be able to respond quickly with well informed decisions.We will examine the key issues involved in the gathering, managing and usingmarket information. Then we will examine how organizations need to scan theirmarketing environment. Scanning is important as it is only by understanding ouroperating environment we can recognise both opportunities and threats. If theinformation required is not available, then the firm may need to conduct somespecific market research. Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 1 | P a g e
  • 2. Why firms need marketing informationFirms need to create, improve or withdraw products from the market in relation towhat customers’ value. They will also be looking to gain new, high-value customersfor their current products. Table 2.1 below lists many kinds of information neededfor marketing decisions.Table 2.1: Common marketing information needsIn creating new products and services, firms need information about: • Unsatisfied needs among potential customer groups; • Dissatisfaction with existing products; • New technologies available from research and development; • The offerings of competitors and other firms; • The likely reaction to new products and services; if introduced; • The effect of the new product on the firm’s current business; and • Regulatory issues that would affect the new product or services.In improving the value of existing products and services, firms need information about: • Customer usage data; • Whether customers believe the products and services are delivering the value required or anticipated; • Whether customers believe the manner in which delivery is made is optional; • Whether staff appreciate how their actions affect the value delivered; • What competitors are doing; and • How customers are likely to react to any changes in price or refinement in products and services offered.In withdrawing products and services from the market, firms need information about: • Whether customers have equally valued alternatives to the current product; • Whether this will affect usage of other products offered by the firm; • How competitors are likely to react; • How existing contractual or other arrangements need to be modified or changed; and • How the changes will affect staff, dealers, and other stakeholders.In acquiring new high-value customers, firms need information about: • What products or suppliers they are currently using; • Products used by current customers who have a similar profile; • Likely usage, service requirements and revenue – hence long-term profit potential; internal costs for servicing customers; and • The effect on other parts of the business.Source: Grabbott et al. (2004). Pp. 112-113 Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 2 | P a g e
  • 3. To obtain this information firms conduct research. This can involve analysinginternal company information sources such as databases, scanning the externalmarket environment for information, or commissioning a market research firm togather specific data.Components of Modern Marketing Information SystemMarketers should have extensive information about consumption patterns and howthey vary across countries. For example, Swiss consume most chocolate, Greeceeats cheese lot, Irish drinks tea most, Punjab and Haryana prefer milk, WestBengal, Tamil Nadu and Kerala go for rice, etc.Most Bangladeshi firms don’t have sophisticated information gathering system.These firms put less importance on marketing research department. Marketingdepartment limits their work only routine forecasting, sales analysis and occasionalsurveys. Some managers complain about how to get hold of critical information.Naturally, the companies with superior information system enjoy a competitiveadvantage. A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.To carry out their analysis, planning, implementation, and control responsibilities,marketing managers need information about developments in the marketingenvironment.The company’s marketing information system should represent a cross betweenwhat managers think they need, what managers really need, and what iseconomically feasible. An internal MIS committee can interview a cross-section ofmarketing managers to discover their information needs. Some useful questions are(page 63): 1. What decisions do you regularly make? 2. What information do you need to make these decisions? 3. What information do you regularly get? 4. What special studies do you periodically request? 5. What information would you want that you are not getting now? 6. What information would you want daily? Weekly? Monthly? Yearly? 7. What magazines and trade reports would you like to see on a regular basis? 8. What topics would you like to be kept informed of? 9. What data analysis programs would you want? 10. What are the four most helpful improvements that could be made in the present marketing information system? Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 3 | P a g e
  • 4. The role of the MIS is to assess the manager’s information needs, develop theneeded information, and distribute that information in a timely fashion. The in-formation is developed through internal company records, marketing intelligenceactivities, marketing research, and marketing decision support analysis. Internal Record SystemMarketing managers rely on internal reports on orders, sales, prices, costs,inventory levels, receivables, payables, and so on. By analyzing this information,they can spot important opportunities and problems.The Order to Payment CycleThe heart of the internal records system is the order-to-payment cycle. Salesrepresentatives, dealers, and customers dispatch orders to the firm. The salesdepartment prepares invoices and transmits copies to various departments. Out-of-stock items are back ordered. Shipped items are accompanied by shipping andbilling documents that are sent to various departments.Today’s companies need to perform these steps quickly and accurately. Customersfavor those firms that can promise timely delivery. Customers and salesrepresentatives fax or e-mail their orders. Computerized warehouses fulfill theseorders quickly.The billing department sends out invoices as quickly as possible. An increasingnumber of companies are using electronic data interchange (EDI) or intranets toimprove the speed, accuracy, and efficiency of the order-to-payment cycle. Retailgiant Wal-Mart tracks the stock levels of its products and its computers sendautomatic replenishment orders to its vendors.Sales Information SystemMarketing managers need timely and accurate reports on current sale. Yourtextbook illustrates this with an example of Wal-Mart (p.64). Wal-Mart operates asales and inventory data warehouse that captures data on every item, for everycustomer, for every store, every day and refreshes it every hour.Technological gadgets are revolutionizing sales reps to have up-to-the-secondinformation. Many companies in South Asian region provide laptops, mobile phones,and internet communication facilities to keep track of sales, collection, inventorylevels, and order position. For example, sales rep of Reliance Petroleum uses hand-held billing machines.Managers must carefully interpret the sales data so as not to draw the wrongconclusions. Read Mustang example in p. 64. Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 4 | P a g e
  • 5. Databases, Data Warehousing and Data MiningCompanies organize their information into database, customer database, productdatabases, salesperson databases and then combine data from the differentdatabases. For example, customer databases may contain every customer’s name,address, past transactions, demographics and psychographics data. Managersidentify potential customers based on data and send mail or email.Companies warehouse these data and make them easily accessible to decisionmakers.ReadReading 2.1: Hair, J.F. Jr. (2007), Knowledge creation in marketing: The role ofpredictive analysis. European Business Review, 19(4), 303-315This article looks at data mining and related techniques and how they can be utilized to provide importantinformation to companies. Marketing Intelligence SystemWhereas the internal records system supplies results data, the marketingintelligence system supplies happenings data. A marketing intelligence system is a set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, and distributors; monitoring “social media” online, emailing lists and blogs; and meeting with other company managers.A company can take several steps to improve the quality of its marketingintelligence.First, it can train and motivate the sales force to spot and report newdevelopments. Sales representatives are the company’s “eyes and ears”; they arepositioned to pick up information missed by other means. Yet they are very busyand often fail to pass on significant information. The company must “sell” its salesforce on their importance as intelligence gatherers. Sales reps should know whichtypes of information to send to which managers. For instance, the Prentice Hallsales reps who sell this textbook let their editors know what is going on in eachdiscipline, who is doing exciting research, and who plans to write cutting-edgetextbooks.Second, the company can motivate distributors, retailers, and other intermediariesto pass along important intelligence. Many companies hire specialists to gather Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 5 | P a g e
  • 6. marketing intelligence. Many luxury hotels in India have mystery guests (mysteryshoppers) who inspect the promptness of room service, look for dust beneathmattresses, and set of minor crises to see how the management deals with them.Companies may take several action based on mystery shoppers report, coachingsales reps, making improvements in overall customer experience, etc.Typical questions on the ‘mystery shopping’ report are: How long before a salesassociate greeted you? Did the sales associate act as if he or she wanted yourbusiness? Was the sales associate knowledgeable about products in stock?Third, companies can learn about competitors by purchasing their products;attending open houses and trade shows; reading competitors’ published reports;attending stockholders’ meetings; talking to employees, dealers, distributors,suppliers, and freight agents; collecting competitors’ ads; and reading local ornational newspapers, magazines and trade association papers.Fourth, the company can set up a customer advisory panel made up ofrepresentative customers or the company’s largest customers or its most outspokenor sophisticated customers. For example, Hitachi Data Systems holds a three-daymeeting with its customer panel of 20 members every 9 months. They discussservice issues, new technologies, and customers’ strategic requirements. Thediscussion is free-flowing, and both parties gain: The company gains valuableinformation about customer needs; and the customers feel more bonded to acompany that listens closely to their comments.Fifth, the company can purchase information from outside suppliers such as theA. C. Nielsen-ORG MARG, TAM Media Research (India), Gallup Pakistan (Pakistan)These research firms gather and store consumer-panel data at a much lower costthan the company could do on its own. Retail audit data, ratings of televisionprograms, consumer panel data, and doctor’s prescription data, etc. are supplied bythese agencies.Sixth, Some companies use online customer feedback systems to collectcompetitive intelligence. Read ‘Clicking on the competition’ (p. 67) to learn howmarketing managers collect data through online discussion forums, chat rooms,blogs, online customer review boards, etc.Seventh, Marketing managers can take the advantage of government dataresources. The Bangladesh Bureau of Statistics provides population statistics,national accounts data, agricultural data and social indicators, etc. The Marketing Research SystemMarketing managers often commission formal marketing studies of specificproblems and opportunities. They may request a market survey, a product-preference test, a sales forecast by region, or an advertising evaluation. We definemarketing research as follows: Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 6 | P a g e
  • 7. Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.Suppliers of Marketing ResearchA company can obtain marketing research in a number of ways. Most largecompanies have their own marketing research departments. Small companies canhire the services of a marketing research firm or conduct research in creative andaffordable ways, such as:■ Engaging students or professors to design and carry out projects: One BostonUniversity MBA project helped American Express develop a successful advertisingcampaign geared toward young professionals. The cost: $15,000.■ Using the Internet: A company can collect considerable information at very littlecost by examining competitors’ Web sites, monitoring chat rooms, and accessingpublished data.■ Checking out rivals: Many small companies routinely visit their competitors. TomCoohill, a chef who owns two Atlanta restaurants, gives managers a food allowanceto dine out and bring back ideas.Companies normally budget marketing research at 1 percent to 2 percent ofcompany sales. A large percentage is spent buying the services of outside firms.Marketing research firms fall into three categories:■ Syndicated-service research firms: These firms gather consumer and tradeinformation, which they sell for a fee. Examples: Nielsen Media Research,SAMI/Burke.■ Custom marketing research firms: These firms are hired to carry out specificprojects. They design the study and report the findings.■ Specialty-line marketing research firms: These firms provide specializedresearch services. The best example is the field-service firm, which sells fieldinterviewing services to other firms. The Marketing Research ProcessesThere are six steps involved, as shown in Table 2.2 below.Table 2.2: Steps in the market research process (pp. 89-101)Step 1: Step 1 is problem definition. This involves defining what theDefine the problem management problem is, and hence what the marketingand research research problem is. This step is crucial. If the researchobjectives problem is defined incorrectly, the research findings will be meaningless. Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 7 | P a g e
  • 8. Step 2: Develop Step 2 is developing an approach to the problem. Thisthe research plan typically involves the specification of research objectives and subsequent information needs. Decisions need to be made regarding the cost of gathering the information, the type of research approach, research instruments; sampling plan and contact methods.Step 3: Collecting This is where theory meets practice! In collecting informationthe information one has to be careful not to make any silly mistakes. Common problems are sampling errors, poorly worded questions, inappropriate measures, and poor interviewers.Step 4: Analyze Although is step 4, the researcher should plan how thethe information information will be analyzed at the beginning of the research steps. There is nothing worse than someone saying, “I have all this data, now what do I do with it?’Step 5: Present The main thing is that the finding s can be understood by thethe findings intelligent layperson. Moreover, the findings should have been able to shed some insight on the initial research problem.Step 6: Make the Once the findings have been presented, management need todecision decide whether there is sufficient information to make a decision. To assist managers, sometimes Marketing Decision Support Systems are used (see below).READKotler, et al. (2009). pp. 87-101 for a comprehensive coverage of the six steps in the market researchprocess.They also outline the type of research approaches available to managers at each of these steps. Youshould have a good understanding of the different options. Marketing Decision Support SystemA growing number of organizations are using a marketing decision support systemto help their marketing managers make better decisions. Little defines an MDSS asfollows: A marketing decision support system (MDSS) is a coordinated collection of data, systems, tools, and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action.The April 13, 1998, issue of Marketing News lists over 100 current marketing andsales software programs that assist in designing marketing research studies,segmenting markets, setting prices and advertising budgets, analyzing media, and Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 8 | P a g e
  • 9. planning sales force activity. Here are examples of decision models that have beenused by marketing managers:BRANDAID: A flexible marketing-mix model focused on consumer packaged goodswhose elements are a manufacturer, competitors, retailers, consumers, and thegeneral environment. The model contains sub models for advertising, pricing, andcompetition. The model is calibrated with a creative blending of judgment, historicalanalysis, tracking, field experimentation, and adaptive control.CALLPLAN: A model to help salespeople determine the number of calls to make perperiod to each prospect and current client. The model takes into account travel timeas well as selling time. The model was tested at United Airlines with anexperimental group that managed to increase its sales over a matched controlgroup by 8 percentage points.DETAILER: A model to help salespeople determine which customers to call on andwhich products to represent on each call. This model was largely developed forpharmaceutical detail people calling on physicians where they could represent nomore than three products on a call. In two applications, the model yielded strongprofit improvements.GEOLINE: A model for designing sales and service territories that satisfies threeprinciples: the territories equalize sales workloads; each territory consists ofadjacent areas; and the territories are compact. Several successful applicationswere reported.MEDIAC: A model to help an advertiser buy media for a year. The media planningmodel includes market-segment delineation, sales potential estimation, diminishingmarginal returns, forgetting, timing issues, and competitor media schedules.Some models now claim to duplicate the way expert marketers normally make theirdecisions. Some recent expert system models include:PROMOTER evaluates sales promotions by determining baseline sales (what saleswould have been without promotion) and measuring the increase over baselineassociated with the promotion.ADCAD recommends the type of ad (humorous, slice of life, and so on) to use giventhe marketing goals, product characteristics, target market, and competitivesituation.Forecasting and Demand MeasurementOne of the reasons for undertaking marketing research is to identify new marketopportunities. Once the research is complete, the company must measure andforecast the size, growth and profit potential of each market opportunity.Essentially ay market consists of the set of actual and potential buyers of a product.The size of the market will depend on how many people have the interest, income Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 9 | P a g e
  • 10. and access to the market offerings. The tasks for marketers is to know how todistinguish between the potential market, available market, qualified availablemarket, served market and penetrated market.Further Market Research?As this is an introductory market subject we will not cover market research in depthin this lecture.Scanning the Macro and Micro Marketing EnvironmentBusiness do not operate in a vacuum. In additions to customer information,business need to know what is going on in the environment in which they areoperating. A firm must adapt to changes in the marketing environment for it tosurvive and prosper. The external environment of a firm is of major interest to anyorganization because it is here that the organization can identify opportunitiesworth capitalizing on and threats that need to be neutralized. By analyzing themacro-environment, companies can identify trends that are a source of clues inidentifying unmet needs.One useful way of remembering the various areas in the macro environment is byusing the acronym PESTLE. This stands for political, economic, Socio-cultural,Technological, Legal, and (Natural) Environment. Demographic issues can begrouped under socio-cultural. READ Textbook: Kotler et al. (2009), pp. 68-84 This section provides comprehensive coverage of the macro-environmental factors impacting marketing. It is critical that you understand how to scan the macro-environment as this is often a critical first step undertaken by marketers before determining product offering, positioning, differentiation and marketing mix.ConclusionOrganizations need some way of systematically collecting information about themarket place, consumer attitudes and preferences, competitive strategies andfuture technological trends. This information is a vital input into decision aboutcreating new products and services, changing existing products and servicesthrough the addition or deletion of product features and the identification of highvalue customers. The systematic collection, analysis and dissemination of marketinformation is known as a marketing information system. Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 10 | P a g e
  • 11. An important source of market information is the analysis of the operatingenvironment of the organization. By looking at the fundamental factors impactingon and driving consumer demand in the macro environment it is possible to identitytrends, needs and changes.Lastly, if the information available to the company from its MIS or through macroenvironmental scanning is not sufficient, the company can conduct (or commission)specific research. Learning Exercise Consider the macro-environment impacting your organization. See Kotler et al. (2009). Pp. 68-84. Where would you source information and market intelligence for each of these PESTLE areas?ReferencesGabbott, M. (ED). (2004). Introduction to marketing: A value exchange approach.Frenches Forest. NSW: Pearson Education Australia.Kotler, P., Keller, K. L., Koshy, A. & Jha, M. (2009). Marketing Mangement: A SouthAsian Perspective (13th ed.). Pearson Education, Delhi.Prepared byZaved MannanAdjunct Faculty MemberUniversity of Liberty Arts Bangladesh Lecture 2: Gathering Information & Scanning the Market; Prepared by Zaved Mannan 11 | P a g e